UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 28, 1997
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, 33-75706-01; 33-75706-02, 33-75706-03
BERRY PLASTICS CORPORATION
BPC HOLDING CORPORATION
BERRY IOWA CORPORATION
BERRY TRI-PLAS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 35-1814673
(State or other jurisdiction of incorporation or organization) (IRS employer
identification no.)
101 OAKLEY STREET, EVANSVILLE, INDIANA 47710
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (812) 424-2904
NONE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Number of Shares Outstanding
COMMON STOCK AS OF AUGUST 1, 1997
Class A - Voting - $.01 Par Value 91,000
Class A - Nonvoting - $.01 Par Value 259,000
Class B - Voting - $.01 Par Value 145,001
Class B - Nonvoting - $.01 Par Value 57,618
Class C - Nonvoting - $.01 Par Value 16,981
<PAGE>
BPC HOLDING CORPORATION AND SUBSIDIARIES
FORM 10-Q INDEX
FOR QUARTERLY PERIOD ENDED JUNE 28, 1997
PAGE NO.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Operations 5
Consolidated Statement of Changes in Stockholders'
Equity (Deficit) 6
Consolidated Statements of Cash Flows 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13
PART II. OTHER INFORMATION
Item 2 (a). Changes in Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURE 17
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
BPC Holding Corporation and Subsidiaries
Consolidated Balance Sheets
(In Thousands of Dollars)
<TABLE>
<CAPTION>
JUNE 28, 1997 DECEMBER 28, 1996
------------- -----------------
<S> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 1,501 $ 10,192
Accounts receivable (less allowance for
doubtful accounts of $845 and $618) 30,870 17,642
Inventories:
Finished goods 15,289 9,100
Raw materials and supplies 4,779 3,945
Custom molds 1,414 562
---------- --------
21,482 13,607
Prepaid expenses and other receivables 1,518 957
Income taxes recoverable 36 436
---------- --------
Total current assets 55,407 42,834
Assets held in trust 24,729 30,188
Property and equipment:
Land 5,156 4,598
Buildings and improvements 25,590 18,290
Machinery, equipment and tooling 102,791 79,043
Automobiles and trucks 1,120 639
Construction in progress 4,394 3,476
---------- --------
139,051 106,046
Less accumulated depreciation 57,199 50,382
---------- --------
81,852 55,664
Intangible assets:
Excess of cost over net assets acquired 13,049 4,273
Deferred financing and origination fees 10,747 9,912
Covenants not to compete 430 40
Deferred acquisition costs 59 527
---------- --------
24,285 14,752
Deferred income taxes 1,625 2,003
Other 475 357
---------- --------
Total assets $188,373 $145,798
========== ========
</TABLE>
<PAGE>
BPC Holding Corporation and Subsidiaries
Consolidated Balance Sheets (continued)
(In Thousands of Dollars)
<TABLE>
<CAPTION>
JUNE 28, 1997 DECEMBER 28, 1996
------------- -----------------
<S> <C> <C>
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 16,229 $ 12,877
Accrued expenses and other liabilities 8,204 4,676
Accrued interest 3,336 3,286
Employee compensation and payroll taxes 5,853 5,230
Income taxes 102 117
Current portion of long-term debt 5,120 738
---------- --------
Total current liabilities 38,844 26,924
Long-term debt, less current portion 250,411 215,308
Accrued dividends on preferred stock 2,163 1,116
---------- --------
291,418 243,348
Stockholders' equity (deficit):
Preferred stock; 1,000,000 shares authorized;
600,000 shares issued and outstanding
(net of discount of $3,210 and $3,355) 11,362 11,216
Class A Common Stock; $.01 par value:
Voting; 500,000 shares authorized;
91,000 shares issued and outstanding 1 1
Nonvoting; 500,000 shares authorized;
259,000 shares issued and outstanding 3 3
Class B Common Stock; $.01 par value:
Voting; 500,000 shares authorized;
145,001 shares issued and outstanding 1 1
Nonvoting; 500,000 shares authorized;
54,779 shares issued and outstanding 1 1
Class C Common Stock; $.01 par value:
Nonvoting; 500,000 shares authorized;
16,981 shares issued and outstanding - -
Treasury stock: 239 shares (22) (22)
Additional paid-in capital 50,633 51,681
Warrants 3,511 3,511
Retained earnings (deficit) (168,535) (163,942)
---------- --------
Total stockholders' equity (deficit) (103,045) (97,550)
---------- --------
Total liabilities and stockholders' equity
(deficit) $ 188,373 $ 145,798
========== ========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
BPC Holding Corporation and Subsidiaries
Consolidated Statements of Operations
(In Thousands of Dollars, Except Per Share Data)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
-------------------------------- -------------------------------
JUNE 28 JUNE 29 JUNE 28 JUNE 29
1997 1996 1997 1996
-------------------------------- -------------------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales $56,929 $38,876 $105,936 $73,872
Cost of goods sold 43,771 27,352 82,167 52,471
-------- -------- --------- --------
Gross margin 13,158 11,524 23,769 21,401
Operating expenses:
Selling 2,737 1,738 5,094 3,409
General and administrative 3,120 5,980 5,725 9,165
Research and development 366 185 602 393
Amortization of intangibles 346 105 624 205
Other 910 175 1,741 51
-------- -------- --------- --------
Operating income 5,679 3,341 9,983 7,717
Other income and expense:
Loss (gain) on disposal of
property and equipment 90 19 90 (23)
-------- -------- --------- --------
Income before interest and income 5,589 3,322 9,893 7,740
taxes
Interest:
Expense (7,742) (4,032) (15,550) (7,479)
Income 709 100 1,156 167
-------- -------- --------- --------
Income (loss) before income taxes (1,444) (610) (4,501) 428
Income tax expense (benefit) 564 (188) 92 209
-------- -------- --------- --------
Net income (loss) (2,008) (422) (4,593) 219
Preferred stock dividends (524) - (1,048) -
-------- -------- --------- --------
Net income (loss) attributable to
common shareholders $ (2,532) $ (422) $ (5,641) $ 219
======== ======== ========= ========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
BPC Holding Corporation and Subsidiaries
Consolidated Statement of Changes in Stockholders' Equity (Deficit)
(In Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
ADDITIONAL RETAINED
COMMON STOCK ISSUED PREFERRED TREASURY PAID-IN EARNINGS
CLASS A CLASS B CLASS C STOCK STOCK CAPITAL WARRANTS (DEFICIT) TOTAL
------- ------- ------- ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 28, 1996 $ 4 $ 2 $ - $11,216 $ (22) $51,681 $ 3,511 $(163,942) $(97,550)
Net loss - - - - - - - (4,593) (4,593)
Accrued dividends on preferred - - - - - (1,408) - - (1,408)
stock
Amortization of preferred stock - - - 146 - - - - 146
discount
------- ------- ------- ------- ------- ------- -------- -------- --------
Balance at June 28, 1997 $ 4 $ 2 $ - $11,362 $ (22) $50,633 $ 3,511 $(168,535) $(103,045)
======= ======= ======= ======= ======= ======= ======= ========= ========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS.
<PAGE>
BPC HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
---------------------------------------------
JUNE 28, 1997 JUNE 29, 1997
-------------------- ---------------------
(UNAUDITED)
OPERATING ACTIVITIES
<S> <C> <C>
Net income(loss) $ (4,593) $ 219
Adjustments to reconcile net income (loss) to net cash
provided by(used for) operating activities:
Depreciation and amortization 7,873 5,302
Non-cash interest expense 739 481
Write off of financing fees 390 -
Non-cash compensation - 358
Gain on sale of property and equipment 90 (23)
Deferred income taxes (20) 172
Changes in operating assets and liabilities:
Accounts receivable, net (8,833) (3,824)
Inventories 2,492 (3,304)
Prepaid expenses and other receivables (96) 219
Accounts payable and accrued expenses (3,938) 1,309
Other assets 164 (6)
---------- --------
Net cash provided by (used for) operating activities (5,732) 903
INVESTING ACTIVITIES
Additions to property and equipment (4,801) (5,890)
Proceeds from disposal of property and equipment 1,060 43
Purchase of PackerWare Corporation (28,190) -
Purchase of assets of Container Industries, Inc. (2,878) -
Purchase of assets of Virginia Design Packaging Corp. (11,129)
Purchase of the Alpha drink cup product line - (776)
---------- --------
Net cash used for investing activities (45,938) (6,623)
FINANCING ACTIVITIES
Proceeds from term loan borrowings 31,980 49
Proceeds from borrowings on revolving line of credit 8,827 -
Payments on long-term borrowings (1,250) (500)
Payment of refinancing fees (1,184) -
Payment of bond consent fee (737) -
Payment on capital lease (116) (106)
Exercise of management stock options - 1,130
Proceeds from senior secured notes - 105,000
Proceeds from issuance of common stock - 52,797
Proceeds from issuance of preferred stock and warrants - 14,572
Rollover investments and share repurchases - (125,219)
Assets held in trust - (35,600)
Net payments to public warrant holders - (4,502)
Debt issuance costs - (5,369)
Interest applied to assets held in trust 5,459 (65)
---------- --------
Net cash provided by financing activities 42,979 2,187
---------- --------
Net decrease in cash and cash equivalents (8,691) (3,533)
Cash and cash equivalents at beginning of period 10,192 8,035
---------- --------
Cash and cash equivalents at end of period $ 1,501 $ 4,502
========== ========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
BPC Holding Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of BPC Holding
Corporation and its subsidiaries (the "Company") have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the
periods presented are not necessarily indicative of the results that may be
expected for the full fiscal year. The accompanying financial statements
include the results of BPC Holding Corporation ("Holding") and its wholly-
owned subsidiary, Berry Plastics Corporation ("Berry"), and its wholly-owned
subsidiaries: PackerWare Corporation, Berry Iowa Corporation; Berry Tri-Plas
Corporation; Berry Sterling Corporation, Berry Plastics Design Corporation,
and AeroCon, Inc. For further information, refer to the consolidated
financial statements and footnotes thereto included in Holding's and Berry's
Form 10-K's filed with the Securities and Exchange Commission for the year
ended December 28, 1996 and information included in Holding's Form S-4 filed
with the Securities and Exchange Commission on August 28, 1996.
2. COMPANY RECAPITALIZATION
On June 18, 1996, BPC Mergerco, Inc. ("Mergerco"), a company organized by
Atlantic Equity Partners International II, L.P., Chase Venture Capital
Associates, L.P., certain other institutional investors and management,
effected the acquisition of a majority of the outstanding capital stock of
Holding by way of merger with Holding, with Holding being the surviving
corporation (the "Transaction"). Sources of funds for the new capital
structure included the issuance of $55.0 million of common stock, $15.0
million of preferred stock and warrants to purchase common shares of
Holding, $105.0 million of 12.5% Senior Secured Notes (the "Notes")
described below, and exercise of management stock options of approximately
$0.9 million. Approximately $125.2 million of the proceeds were used for
rollover investments and purchase of equity interests, and the remaining
proceeds were used to make payments of approximately $4.5 million to public
warrant holders, to establish an escrow account of $35.6 million to pay the
first three years' interest on the Notes, to make deferred payments to
certain holders of stock options of approximately $2.5 million, to pay fees
and expenses related to the transaction of approximately $7.7 million, and
$0.4 million was held in cash.
In connection with the Transaction, Holding retired its old Class A and
Class B common stock and authorized the creation of 500,000 shares each of
new Class A voting and non-voting common stock, 500,000 shares each of new
Class B voting and non-voting common stock, and 500,000 shares of new Class
C non-voting common stock.
<PAGE>
3. ISSUANCE OF SENIOR SECURED NOTES
In connection with the Transaction mentioned above, Holding completed a 144A
private placement of $105.0 million of Senior Secured Notes due 2006 (the
"Old Notes"). On October 9, 1996, Holding consummated an exchange offer
whereby the Old Notes were exchanged for 12.5% Series B Senior Secured Notes
due 2006 (the "Notes"). The terms of the Notes are identical in all
material respects to the Old Notes, except that the Notes have been
registered under the Securities Act of 1933, as amended, and therefore do
not bear legends restricting their transfer and do not contain certain
provisions providing for the payment of liquidated damages to the holders of
the Old Notes under certain circumstances relating to the registration of
the Old Notes, which provisions terminated upon the consummation of the
exchange of the Old Notes for the Notes. The Notes bear interest at 12.5%
and mature on June 15, 2006. These Notes are senior secured obligations of
Holding and are secured by a first priority pledge of all shares of
outstanding capital stock of Berry. Except as provided below, interest on
the Notes is payable in cash semi-annually in arrears on June 15 and
December 15 of each year.
Proceeds of the Old Notes (net of fees and expenses of approximately $5.4
million) were used to finance $64.0 million of the purchase of equity
interests and establish an escrow of $35.6 million to pay the first three
years' interest on the Notes.
In addition, from December 15, 1999 until June 15, 2001, the Company may, at
its option, pay interest, at an increased rate of .75% per annum, in the
form of additional Notes valued at 100% of the principal amount thereof.
4. ACQUISITIONS
On January 17, 1997, Berry acquired substantially all of the assets of
Container Industries, Inc. ("Container Industries") of Pacoima, California
for $2.9 million. The purchase was funded out of operating funds. The
operations of Container Industries are included in Berry's operations from
the acquisition date using the purchase method of accounting.
On January 21, 1997, Berry acquired PackerWare Corporation ("PackerWare"), a
Kansas corporation, for aggregate consideration of approximately $28.2
million and merged PackerWare with and into a newly-formed, wholly-owned
subsidiary of Berry. The purchase was primarily financed through the New
Credit Facility (see Note 5). The operations of PackerWare are included in
Berry's operations from the acquisition date using the purchase method of
accounting.
On May 13, 1997, Berry Plastics Design Corporation, a newly-formed wholly-
owned subsidiary of Berry, acquired substantially all of the assets of
Virginia Design Packaging Corp. ("Virginia Design") for approximately $11.1
million. The purchase was financed through the New Credit Facility. The
operations of Berry Plastics Design Corporation are included in Berry's
operations from the acquisition date using the purchase method of
accounting.
<PAGE>
The pro forma results listed below are unaudited and reflect purchase
accounting adjustments assuming the Container Industries, PackerWare and
Virginia Design acquisitions occurred on December 31, 1995.
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
JUNE 29, 1996 JUNE 29, 1996
(In thousands)
<S> <C> <C>
Net sales $ 52,409 $ 99,065
Loss before income taxes (1,494) (1,091)
Net loss (1,494) (882)
</TABLE>
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.
1. REFINANCING OF REVOLVING CREDIT FACILITY
Concurrent with the acquisition of PackerWare (see Note 4), Berry entered
into a financing and 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"). As a result of the acquisition of assets of
Virginia Design, the New Credit Facility was increased to $74.0 million.
The indebtedness under the New Credit Facility is guaranteed by Holding and
Berry's subsidiaries. The New Credit Facility replaced the facility
previously provided by Fleet Capital Corporation.
The New Credit Facility, including the financing for Virginia Design,
provides Berry with a $30.0 million revolving line of credit, subject to a
borrowing base formula, a $32.0 million term loan facility and a $12.0
million standby letter of credit to support Berry's and its subsidiaries'
obligations under the Nevada and Iowa Industrial Revenue Bonds. Berry
borrowed all $32.0 million of the term loan facility to finance the
PackerWare and Virginia Design acquisitions.
The New Credit Facility matures January 21, 2002 unless previously
terminated by Berry or by the lenders upon an Event of Default as defined in
the New Credit Facility. Interest on borrowings on the New Credit Facility
will be based on the lender's base rate plus 1.0% or LIBOR plus 2.0%, at
Berry's option.
<PAGE>
2. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
JUNE 28, DECEMBER 28,
1997 1996
------------- ---------------
(In thousands)
<S> <C> <C>
Holding 12.50% Senior Secured Notes $105,000 $105,000
Berry 12.25% Senior Subordinated Notes 100,000 100,000
Term loan 31,230 -
Revolving line of credit 8,827 -
Nevada Industrial Revenue Bonds 5,000 5,500
Iowa Industrial Revenue Bonds 5,400 5,400
Capital lease obligation 669 785
Debt discount (595) (639)
--------- ----------
255,531 216,046
Less current portion of long-term debt 5,120 738
--------- ----------
$250,411 $215,308
========= ==========
</TABLE>
The current portion of long-term debt is limited to $4.4 million of
quarterly installments to the term loan, a $0.5 million repayment of the
industrial revenue bonds and the monthly principal payments related to a
capital lease obligation. Berry also maintains the $30.0 million revolving
line of credit with NationsBank, N.A. (see Note 5). Based on the borrowing
formula as of June 28, 1997, Berry had approximately $20.5 million of
additional available credit under the NationsBank, N.A. credit line.
7. PATENT INFRINGEMENT LITIGATION
On April 25, 1996, in connection with the patent infringement lawsuit filed
by Berry Sterling Corporation against Pescor Plastics, Inc., the United
States District Court for the Eastern District of Virginia entered an order
that held that Berry Sterling's patent for the design of a drink cup was not
valid. Berry Sterling is currently appealing this ruling.
<PAGE>
8. BERRY PLASTICS CORPORATION SUMMARY FINANCIAL INFORMATION
The following summarizes financial information of Holding's wholly-owned
subsidiary, Berry Plastics Corporation, and its subsidiaries.
<TABLE>
<CAPTION>
JUNE 28, 1997 December 28, 1996
-------------- -----------------
(In thousands)
<S> <C> <C>
BALANCE SHEETS
Current assets $ 55,029 $ 42,445
Property and equipment - net of
accumulated depreciation 81,852 55,664
Other noncurrent assets 21,558 12,046
----------- -----------
Total assets $ 158,439 $ 110,155
=========== ===========
Current liabilities $ 40,890 $ 26,220
Noncurrent liabilities 145,410 113,112
Stockholders' equity (deficit) (27,861) (29,177)
----------- -----------
Total liabilities and stockholders'
equity (deficit) $ 158,439 $ 110,155
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
-------------------------------- --------------------------------
JUNE 28, 1997 JUNE 29, 1996 JUNE 28, 1997 JUNE 29, 1996
-------------- -------------- --------------- --------------
(In thousands) (In thousands)
STATEMENTS OF OPERATIONS
<S> <C> <C> <C> <C>
Net sales $ 56,929 $ 38,876 $ 105,935 $ 72,873
Cost of goods sold 43,771 27,352 82,167 52,471
Operating income 5,752 6,661 10,129 11,376
Income before income taxes 1,380 2,922 1,413 3,963
</TABLE>
<PAGE>
Item 2.
BPC Holding Corporation and Subsidiaries
Management's Discussion and Analysis of Financial Condition and
Results of Operations
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.
RESULTS OF OPERATIONS
13 WEEKS ENDED JUNE 28, 1997 (THE "QUARTER")
COMPARED TO 13 WEEKS ENDED JUNE 29, 1996 (THE "PRIOR QUARTER")
NET SALES. Net sales increased $18.0 million, or 46%, to $56.9 million
for the Quarter from $38.9 million for the Prior Quarter, including an
approximate 3.0% increase in net selling price due mainly to the impact of
cyclical adjustments in the price of plastic resin. The increase in net sales
was attributed to a combination of the addition of PackerWare and Virginia
Design net sales of an aggregate of $13.7 million, higher overcap sales of $0.3
million, higher drink cup sales of $2.0 million (excluding PackerWare) and
higher container sales of $2.2 million. Sales of custom products were flat
with the prior year.
GROSS MARGIN. Gross margin increased by $1.7 million to $13.2 million
for the Quarter from $11.5 million for the Prior Quarter. This increase of 15%
included the combined impact of both the PackerWare and Virginia Design sales
volume. Gross margin as a percent of sales decreased to 23.2% of net sales for
the Quarter from 29.6% of net sales in the prior Quarter due to the addition of
lower margin business from PackerWare and Virginia Design, the cyclical impact
of higher raw material costs compared to the Prior Quarter, and suppressed
market selling prices in both the container and drink cup product lines.
OPERATING EXPENSES. Selling expenses increased by $1.0 million to $2.7
million for the Quarter from $1.7 million for the Prior Quarter principally as
a result of expanded sales coverage, the acquisition of PackerWare and the
assets of Virginia Design, and increased product development and marketing
expenses. General and administrative expenses decreased by $2.9 million to
$3.1 million for the Quarter from $6.0 million for the Prior Quarter, mainly
because of $2.5 million of deferred payments to certain holders of stock
options (SEE NOTE 2) were made in the Prior Quarter, and also because of a
reduction of expenses due to the consolidation of the Winchester plant in late
1996, and a reduction of patent litigation expenses. During the Quarter, one-
time transition expenses for the PackerWare, Container Industries and Virginia
Design transactions were $0.9 million. In the Prior Quarter, the transition
relating to the acquisition of assets of Tri-Plas resulted in an expense of
$0.2 million.
INTEREST EXPENSE. Interest expense increased $3.7 million to $7.7
million for the Quarter compared to $4.0 million for the Prior Quarter due to
the issuance of Senior Secured Notes in June 1996 (SEE NOTE 3) and the New
Credit Facility (SEE NOTE 5).
INCOME TAX. For the Quarter, the Company recordedincome tax expense
of $0.6 million compared to an income tax benefit of $0.2 million for the Prior
Quarter. The expense for the Quarter of $0.6 million resulted from a change in
the year-to-date estimated effective income tax rate. Primary reconciling items
between taxes computed at the Federal statutory rate and taxes computed for
book purposes include state income taxes and amortization of goodwill not
deductible for tax purposes.
NET INCOME (LOSS) AND EBITDA. Net loss for the Quarter of $2.0 million
increased $1.6 million from net loss of $0.4 million for the Prior Quarter for
the reasons discussed above. EBITDA, defined as income before taxes, interest,
depreciation, amortization, loss (gain) on disposal of property and equipment,
write-off of deferred acquisition costs, write-off of financing fees, one-time
transition expenses related to acquisitions by the Company, and the shutdown of
the Winchester, Virginia facility, was $10.7 million for the Quarter compared
to $6.2 million for the Prior Quarter.
26 Weeks Ended June 28, 1997 ("YTD")
Compared to 26 Weeks Ended June 29, 1996 ("prior YTD")
NET SALES. Net sales increased $32.0 million, or 43%, to $105.9 million
YTD from $73.9 million for the prior YTD, notwithstanding an approximate 3%
increase in net selling price due mainly to the impact of cyclical adjustments
in the price of plastic. Other increases in net sales were attributed to a
combination of the addition of PackerWare and Virginia Design net sales of an
aggregate of $25.0 million, higher aerosol overcap sales of $1.5 million,
higher drink cup sales of $2.8 million (excluding PackerWare drink cup net
sales), higher container sales of $2.5 million, and higher custom molded
products of $0.3 million.
GROSS MARGIN. Gross margin increased by $2.4 million to $23.8 million
YTD from $21.4 million for the prior YTD. This increase in gross margin
included $4.1 million from the PackerWare acquisition offset by a decrease of
$1.7 million resulting from the cyclical impact of higher raw material costs
compared to the prior YTD and suppressed market prices in both the container
and drink cup product lines. Additionally, the Evansville plant incurred
additional plant overhead costs in the first quarter of 1997 associated with
supporting expanded injection molding capacity and capabilities.
OPERATING EXPENSES. Selling expenses increased by $1.7 million to $5.1
million YTD from $3.4 million for the prior YTD principally as a result of
expanded sales coverage, the acquisition of PackerWare and the assets of
Virginia Design, and increased product development and marketing expenses.
General and administrative expenses decreased by $3.5 million to $5.7 million
YTD from $9.2 million for the prior YTD. The decrease was primarily due to
prior year expenses relating to the Transaction of $3.1 million, including $2.5
million of deferred payments to certain holders of stock options (SEE NOTE 2),
and a decrease in patent and other litigation expenses of $0.5 million. Other
YTD expense of $1.7 million included $0.3 million of cost associated with the
shutdown of the Winchester, Virginia facility, $0.9 million associated with the
transition of the PackerWare business, and $0.5 million resulting from the
transition of both the Container Industries and Virginia Design acquisitions.
Prior YTD other expenses of $0.5 million included transition costs associated
with the Tri-Plas and Sterling acquisitions.
INTEREST EXPENSE. Interest expense increased $8.1 million to $15.6
million YTD compared to $7.5 million for the prior YTD due to the issuance of
the Senior Secured Notes in June 1996 (SEE NOTE 3) and the New Credit Facility
(SEE NOTE 5).
INCOME TAX. The Company recorded income tax expense of $0.1 million YTD
compared to an income tax expense of $0.2 million in the prior YTD.
NET INCOME (LOSS) AND EBITDA. Net loss YTD of $4.6 million decreased
$4.8 million from net income of $0.2 million for the prior YTD for the reasons
discussed above. EBITDA, defined as income before taxes, interest,
depreciation, amortization, loss (gain) on disposal of property and equipment,
write-off of deferred acquisition costs, one-time transition expenses related
to acquisitions made by the Company, and expenses related to the Transaction,
was $19.6 million YTD compared to $16.7 million for the prior YTD.
LIQUIDITY AND SOURCES OF CAPITAL
Net cash used for operating activities was $5.7 million through the twenty-six
week period ending June 28, 1997, an increase of $6.6 million from the
comparable prior year period. This change includes a reduction in accounts
payable of approximately $3.5 million resulting from a discounting program with
a key supplier and other working capital changes (defined as accounts
receivable, inventories, prepaid expenses, other receivables, accounts payable
and accrued expenses) associated with the significant increase in the Company's
net sales.
Capital spending of $4.8 million included $2.4 million for molds and molding
machines, $0.3 for printing-related equipment, and $2.1 million for building
and accessory equipment. Additionally, Berry purchased PackerWare, certain
assets of Container Industries and certain assets of Virginia Design (see Note
4). Berry currently intends to finance capital spending through cash flow from
operations, existing cash balances, and cash available under the NationsBank
revolving credit agreement.
At June 28, 1997, the Company's cash balance was $1.5 million, and Berry had
unused borrowing capacity under the New Credit Facility's borrowing base of
approximately $20.5 million.
<PAGE>
PART II. OTHER INFORMATION
ITEM 2 (A). CHANGES IN SECURITIES
Pursuant to a Consent Solicitation Statement dated May 12, 1997,
Berry solicited consents from the holders of its 12 1/4 % Senior
Subordinated Notes due 2004 (the "Notes") to effect certain
amendments (the "Amendments") to the Indenture dated April 24,
1994, as supplemented, governing the Notes (the "Indenture").
The requisite number of consents was received, and the Amendments
became effective on June 10, 1997. Capitalized terms used, but
not defined, below have the meanings ascribed to them in the
Indenture.
The Amendments (a) permit the Subsidiaries, in addition to Berry,
to incur Indebtedness and issue Disqualified Stock if the
applicable Fixed Charge Coverage Ratio is achieved; (b) in
determining whether the applicable Fixed Charge Coverage Ratio
has been achieved, permit the inclusion of the earnings of any
business acquired by any Subsidiary, in addition to any business
acquired by Berry, with the proceeds of Indebtedness incurred or
Disqualified Stock issued by Berry or any such Subsidiary; (c)
permit the Subsidiaries, in addition to Berry, to incur
Refinancing Indebtedness; (d) permit Berry and the Subsidiaries
to purchase, redeem or otherwise acquire or retire for value any
Indebtedness between or among Berry and its Subsidiaries or
between or among such Subsidiaries; and (e) correct the
inadvertent omission of the word "and" in the definition of
"Permitted Refinancing."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
As described under Item 3 above, Berry solicited consents from
the holders of the Notes to effect the Amendments to the
Indenture. The consent of the holders of greater than 99% of the
Notes was received.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
None
(b) Reports on Form 8-K:
None
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.
Berry Plastics Corporation
BPC Holding Corporation
Berry Iowa Corporation
Berry Tri-Plas Corporation
August 12, 1997
/S/ JAMES M. KRATOCHVIL
James M. Kratochvil
Vice President, Chief Financial Officer,
Treasurer and Secretary of Berry
Plastics Corporation and its
Subsidiaries (Principal Financial
and Accounting Officer)
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