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 April 3, 1999
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
BERRY PLASTICS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
Delaware 35-1813706
<S> <C> <C>
(State or other jurisdiction (IRS employer
of incorporation or organization) identification number)
BPC HOLDING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 35-1814673
(State or other jurisdiction (IRS employer
of incorporation or organization) identification number)
BERRY IOWA CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 42-1382173
(State or other jurisdiction (IRS employer
of incorporation or organization) identification number)
BERRY TRI-PLAS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 56-1949250
(State or other jurisdiction (IRS employer
of incorporation or organization) identification number)
BERRY STERLING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 54-1749681
(STATE OR OTHER JURISDICTION (IRS EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
AEROCON, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 35-1948748
(STATE OR OTHER JURISDICTION (IRS EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
PACKERWARE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Kansas 48-0759852
(STATE OR OTHER JURISDICTION (IRS EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
BERRY PLASTICS DESIGN CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 62-1689708
(STATE OR OTHER JURISDICTION (IRS EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
VENTURE PACKAGING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 51-0368479
(STATE OR OTHER JURISDICTION (IRS EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
VENTURE PACKAGING MIDWEST, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Ohio 34-1809003
(STATE OR OTHER JURISDICTION (IRS EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
VENTURE PACKAGING SOUTHEAST, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
South Carolina 57-1029638
(STATE OR OTHER JURISDICTION (IRS EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
NIM HOLDINGS LIMITED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
England and Wales N/A
(STATE OR OTHER JURISDICTION (IRS EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
NORWICH INJECTION MOULDERS LIMITED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
England and Wales N/A
(STATE OR OTHER JURISDICTION (IRS EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
KNIGHT PLASTICS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 35-2056610
(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)
</TABLE>
REGISTRANTS' TELEPHONE NUMBER, INCLUDING AREA CODE: (812) 424-2904
NONE
(Former name, former address and former fiscal year, if changed since last
report)
<PAGE>
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 issuers' classes of
common stock, as of the latest practicable date:
As of May 10, 1999, 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; 144,546 shares of
Class B Voting Common Stock; 56,842 shares of Class B Nonvoting Common
Stock; and 16,833 shares of Class C Nonvoting Common Stock. As of May 10,
1999, 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, 100 shares of the Common Stock, $.01
par value, of Berry Tri-Plas Corporation, 100 shares of the Common Stock,
$.01 par value, of Berry Sterling Corporation, 100 shares of the Common
Stock, $.01 par value, of Aerocon, Inc., 100 shares of the Common Stock,
$.01 par value, of PackerWare Corporation, 100 shares of the Common Stock,
$.01 par value, of Berry Plastics Design Corporation, 100 shares of the
Common Stock, $.01 par value, of Venture Packaging, Inc., 100 shares of the
Common Stock, $.01 par value, of Venture Packaging Midwest, Inc., 100
shares of the Common Stock, $.01 par value, of Venture Packaging Southeast,
Inc., 4,000,000 Ordinary Shares of <pound-sterling>1 par value, of NIM
Holdings Limited, 5,850 Ordinary Shares of <pound-sterling>1 par value, of
Norwich Injection Moulders Limited, and 100 shares of the Common Stock,
$.01 par value, of Knight Plastics, Inc.
<PAGE>
BPC HOLDING CORPORATION AND SUBSIDIARIES
FORM 10-Q INDEX
FOR QUARTERLY PERIOD ENDED APRIL 3, 1999
PAGE NO.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets 5
Consolidated Statements of Operations 7
Consolidated Statements of Cash Flows 8
Notes to Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURE 19
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
BPC Holding Corporation and Subsidiaries
Consolidated Balance Sheets
(In Thousands of Dollars)
<TABLE>
<CAPTION>
APRIL 3, JANUARY 2,
1999 1999
--------- ---------
<S> <C> <C> <C>
(UNAUDITED)
Assets
Current assets:
Cash and cash equivalents $ 4,185 $ 2,318
Accounts receivable (less allowance for doubtful
accounts of $1,225 at April 3, 1999 and $1,651 at
January 2, 1999) 42,108 29,951
Inventories:
Finished goods 23,654 23,146
Raw materials and supplies 8,890 8,556
------- -------
32,544 31,702
Prepaid expenses and other receivables 1,812 1,665
Income taxes recoverable 83 577
------- -------
Total current assets 80,732 66,213
Assets held in trust 6,764 6,679
Property and equipment:
Land 7,756 7,769
Buildings and improvements 38,922 38,960
Machinery, equipment and tooling 139,300 141,054
Automobiles and trucks 1,371 1,386
Construction in progress 18,209 11,780
------- -------
205,558 200,949
Less accumulated depreciation 85,794 80,944
------- -------
119,764 120,005
Intangible assets:
Deferred financing and origination fees, net 10,235 10,327
Covenants not to compete, net 4,158 4,404
Excess of cost over net assets acquired, net 42,775 44,536
Deferred acquisition costs 43 20
------- -------
57,211 59,287
Deferred income taxes 2,758 2,758
Other 371 375
------- -------
Total assets $ 267,600 $ 255,317
======= =======
</TABLE>
<PAGE>
Consolidated Balance Sheets (continued)
(In Thousands of Dollars)
<TABLE>
<CAPTION>
APRIL 3, JANUARY 2,
1999 1999
--------- ---------
<S> <C> <C> <C>
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 20,260 $ 18,059
Accrued expenses and other liabilities 9,772 9,944
Accrued interest 10,943 4,166
Employee compensation and payroll taxes 8,486 8,953
Income taxes 1,228 941
Current portion of long-term debt 19,774 19,388
------- -------
Total current liabilities 70,463 61,451
Long-term debt, less current portion 307,840 303,910
Accrued dividends on preferred stock 8,189 7,225
Deferred income taxes 480 497
Other liabilities 2,330 2,591
------- -------
389,302 375,674
Stockholders' equity (deficit):
Series A Preferred Stock; 800,000 shares
authorized; 600,000 shares issued and outstanding
(net of discount of $2,697 at April 3, 1999 and 11,874 11,801
$2,770 at January 2, 1999)
Series B Preferred Stock; 200,000 shares
authorized, issued and outstanding 5,000 5,000
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; 145,058 shares
issued and 144,546 shares outstanding 1 1
Nonvoting; 500,000 shares authorized; 58,612 shares
issued and 56,937 shares outstanding 1 1
Class C Common Stock; $.01 par value:
Nonvoting; 500,000 shares authorized; 17,000 shares
issued and 16,833 shares outstanding - -
Treasury stock: 512 shares Class B Voting Common
Stock; 1,675 shares Class B Nonvoting Common Stock;
and 167 shares Class C Nonvoting Common Stock (280) (280)
Additional paid-in capital 44,574 45,611
Warrants 3,511 3,511
Retained earnings (deficit) (186,015) (185,923)
Accumulated other comprehensive loss (372) (83)
------- -------
Total stockholders' equity (deficit) (121,702) (120,357)
------- -------
Total liabilities and stockholders' equity (deficit) $ 267,600 $ 255,317
======= =======
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
BPC Holding Corporation and Subsidiaries
Consolidated Statements of Operations
(In Thousands of Dollars)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
-------------------------------------
APRIL 3, MARCH 28,
<S> <C> <C> <C>
1999 1998
----------- -----------
(UNAUDITED)
Net sales $ 77,460 $ 66,730
Cost of goods sold 54,523 49,248
------- -------
Gross margin 22,937 17,482
Operating expenses:
Selling 4,230 3,625
General and administrative 6,038 4,398
Research and development 542 394
Amortization of intangibles 1,275 880
Other expenses 956 1,134
------- -------
Operating income 9,896 7,051
Other expenses:
Loss on disposal of property and equipment 609 133
------- -------
Income before interest and taxes 9,287 6,918
Interest:
Expense (9,286) (8,665)
Income 100 238
------- -------
Income (loss) before income taxes 101 (1,509)
Income taxes 193 13
------- -------
Net loss (92) (1,522)
Preferred stock dividends (964) (914)
Amortization of preferred stock discount (73) (73)
------- -------
Net loss attributable to common shareholders $ (1,129) $ (2,509)
======= =======
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
BPC Holding Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands of Dollars)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
-----------------------------------
APRIL 3, MARCH 28,
<S> <C> <C> <C>
1999 1998
----------- -----------
(UNAUDITED)
OPERATING ACTIVITIES
Net loss $ (92) $ (1,522)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 5,874 4,888
Non-cash interest expense 436 444
Amortization 1,275 880
Interest funded by assets held in trust (85) (211)
Loss on sale of property and equipment 609 133
Changes in operating assets and liabilities:
Accounts receivable, net (12,157) (8,390)
Inventories (842) (958)
Prepaid expenses and other receivables 347 957
Other assets 4 (301)
Payables and accrued expenses 8,713 5,130
------- -------
Net cash provided by operating activities 4,082 1,050
INVESTING ACTIVITIES
Additions to property and equipment (6,639) (1,963)
Proceeds from disposal of property and equipment 90 7
------- -------
Net cash used for investing activities (6,549) (1,956)
FINANCING ACTIVITIES
Proceeds from long-term borrowings 9,795 2,626
Payments on long-term borrowings (5,442) (1,695)
------- -------
Net cash provided by financing activities 4,353 931
Effect of exchange rate changes on cash (19) -
------- -------
Net increase in cash and cash equivalents 1,867 25
Cash and cash equivalents at beginning of period 2,318 2,688
------- -------
Cash and cash equivalents at end of period $ 4,185 $ 2,713
======= =======
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
BPC Holding Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands of dollars, except as otherwise noted)
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of BPC Holding
Corporation 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: Berry Iowa
Corporation, Berry Tri-Plas Corporation, Berry Sterling Corporation, AeroCon,
Inc., PackerWare Corporation, Berry Plastics Design Corporation, Venture
Packaging, Inc., Venture Packaging Midwest, Inc., Venture Packaging Southeast,
Inc., NIM Holdings Limited ("NIM Holdings"), Norwich Injection Moulders Limited
("Norwich Moulders"), and Knight Plastics, 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 January 2, 1999.
Certain amounts on the 1998 financial statements have been reclassified to
conform with the 1999 presentation.
2. ACQUISITIONS
On July 2, 1998, NIM Holdings, a newly-formed, wholly-owned subsidiary of
Berry, acquired all of the capital stock of Norwich Moulders of Norwich,
England for aggregate consideration of approximately $14.0 million. The
purchase was primarily financed through the Credit Facility (see Note 3). The
operations of Norwich Moulders are included in Berry's operations since the
acquisition date using the purchase method of accounting.
On October 16, 1998, Knight Plastics, Inc. ("Knight"), a newly formed wholly-
owned subsidiary of Berry, acquired substantially all of the assets of the
Knight Engineering and Plastics Division of Courtaulds Packaging Inc. for
aggregate consideration of approximately $18.0 million. The purchase was
financed through the Credit Facility's revolving line of credit.
<PAGE>
2. ACQUISITIONS (CONTINUED)
The pro forma results listed below are unaudited and reflect purchase
accounting adjustments assuming the Norwich Moulders and Knight acquisitions
occurred on December 28, 1997.
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
MARCH 28, 1998
--------------------
<S> <C>
Net sales $ 76,036
Loss before income taxes (2,310)
Net loss attributable to common stockholders (3,368)
</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 effects.
3. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
APRIL 3, JANUARY 2,
1999 1999
--------- ---------
<S> <C> <C> <C>
Holding 12.50% Senior Secured Notes $105,000 $105,000
Berry 12.25% Senior Subordinated Notes 125,000 125,000
Term loans 65,845 71,243
Revolving line of credit 25,957 16,162
Nevada Industrial Revenue Bonds 4,000 4,500
Capital leases 1,017 561
Debt premium, net 795 832
--------- ---------
327,614 323,298
Less current portion of long-term debt 19,774 19,388
--------- ---------
$307,840 $303,910
========= =========
</TABLE>
The current portion of long-term debt consists of $19.0 million of quarterly
installments on the term loans, a $0.5 million repayment of the industrial
bonds and the monthly principal payments related to capital lease obligations.
<PAGE>
3. LONG-TERM DEBT (CONTINUED)
Concurrent with the Venture Packaging acquisition in 1997, the Company amended
its then existing financing and security agreement (the "Security Agreement")
with NationsBank, N.A. for a senior secured line of credit to increase the
commitments thereunder to an aggregate principal amount of $127.2 million (the
"Credit Facility"). Concurrent with the Norwich Acquisition, the Credit
Facility was amended and increased to $132.6 million (plus an additional
revolving credit facility of <pound-sterling>1.5 million (the "UK Revolver")
and a term loan facility of <pound-sterling>4.5 million (the "UK Term Loan"),
each for NIM Holdings and Norwich Moulders). The indebtedness under the Credit
Facility is guaranteed by Holding and substantially all of its subsidiaries.
The obligations of the Company and the subsidiaries under the Credit Facility
and the guarantees thereof are secured primarily by all of the assets of such
persons.
The Credit Facility provides the Company with (i) a $50.0 million revolving
line of credit, subject to a borrowing base formula, (ii) the UK Revolver,
subject to a borrowing base, (iii) a $63.7 million term loan facility, (iv) the
UK Term Loan and (v) a $5.6 million standby letter of credit facility to
support the Company's and its subsidiaries' obligations under the Nevada
Industrial Revenue Bonds. The Credit Facility also provides for a $5.4 million
term loan facility, the proceeds of which were used to retire in July 1998 the
Company's and its subsidiaries' obligations under the Iowa Bonds, on which
Berry Iowa had agreed, pursuant to a Loan and Trust Agreement with The City of
Iowa Falls, Iowa, to pay amounts sufficient to pay principal, interest and any
premium with respect to the Iowa Bonds. Also, the Credit Facility provided a
term loan facility to support the Company's and its subsidiaries' obligations
under the South Carolina Industrial Development Bonds. In August 1998, in
conjunction with the closing and sale of the Anderson, South Carolina Facility,
the Bonds were paid by the Company. The difference between the repayment of
the development bonds and other related liabilities and the net proceeds from
the sale of the facility of approximately $3.0 million has been financed with
borrowings under the term loan facility. The Company has borrowed all amounts
available under the term loan facility and the UK Term Loan to finance recent
acquisitions. At April 3, 1999, the Company had unused borrowing capacity
under the Credit Facility's revolving line of credit of approximately $23.4
million.
The 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. The term loan facility requires periodic payments, varying
in amount, through the maturity of the facility. Interest on borrowings under
the Credit Facility is based on either (i) the lender's base rate (which is the
higher of the lender's prime rate and the federal funds rate plus 0.50%) plus
an applicable margin of 0.50% or (ii) LIBOR (adjusted for reserves) plus an
applicable margin of 2.0%, at the Company's option. Following receipt of the
quarterly financial statements, the agent under the Credit Facility has the
option to change the applicable interest rate margin on loans (other than under
the UK Revolver and UK Term Loan) once per quarter to a specified margin
determined by the ratio of funded debt to EBITDA of the Company and its
subsidiaries. Notwithstanding the foregoing, interest on borrowings under the
UK Revolver and the UK Term Loan is based on LIBOR (adjusted for reserves) plus
2.50%.
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 AND (III) LIMITATIONS ON CAPITAL EXPENDITURES.
<PAGE>
4. 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>
APRIL 3, JANUARY 2,
1999 1999
--------- ---------
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEETS
Current assets $ 80,339 $ 65,590
Property and equipment - net of accumulated
depreciation 119,764 120,005
Other noncurrent assets 56,761 58,716
Current liabilities 66,067 60,210
Noncurrent liabilities 213,745 210,093
Equity (deficit) (22,948) (25,992)
THIRTEEN WEEKS ENDED
--------------------------------------
APRIL 3, MARCH 28,
1999 1998
--------- ---------
<S> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS
Net sales $ 77,460 $ 66,730
Cost of goods sold 54,523 49,248
Income before income taxes 3,519 1,684
Net income 3,334 1,671
The following summarizes parent company only financial information of Berry:
APRIL 3, JANUARY 2,
1999 1999
--------- ---------
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEETS
Current assets $ 36,261 $ 28,579
Property and equipment - net of accumulated
depreciation 49,244 48,220
Investment in/due from subsidiaries 127,249 120,230
Other noncurrent assets 15,188 15,629
Current liabilities 45,153 41,325
Noncurrent liabilities 205,737 197,325
Equity (deficit) (22,948) (25,992)
THIRTEEN WEEKS ENDED
--------------------------------------
APRIL 3, MARCH 28,
1999 1998
--------- ---------
<S> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS
Net sales $ 35,532 $ 35,146
Cost of goods sold 22,455 23,179
Income before income taxes 3,519 1,684
Net income 3,334 1,671
</TABLE>
<PAGE>
5. SEGMENT REPORTING
The Company has two reportable segments: packaging products and housewares
products. The Company's packaging business consists of three primary market
groups: aerosol overcaps, containers, and plastic drink cups. The Company's
housewares business consists of semi-disposable plastic housewares and plastic
lawn and garden products, sold primarily through major national retail
marketers and national chain stores.
The Company evaluates performance and allocates resources based on operating
income before depreciation and amortization of intangibles adjusted to exclude
(i) market value adjustment related to stock options, (ii) other non-recurring
or "one-time" expenses, (iii) management fees and reimbursed expenses paid to
First Atlantic and (iv) certain legal expenses associated with unusual
litigation ("Adjusted EBITDA"). The accounting policies of the reportable
segments are the same as those described in the summary of significant
accounting policies. The Company's reportable segments are business units that
offer different products to different markets.
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------------------------
APRIL 3, MARCH 28,
1999 1998
--------- ---------
<S> <C> <C> <C>
Net sales:
Packaging products $ 65,164 $ 58,637
Housewares products 12,296 8,093
Adjusted EBITDA:
Packaging products 15,566 12,601
Housewares products 2,759 1,578
Reconciliation of Adjusted EBITDA to loss
before income taxes:
Adjusted EBITDA for reportable segments $ 18,325 $ 14,179
Net interest expense (9,186) (8,427)
Depreciation (5,874) (4,888)
Amortization (1,275) (880)
Loss on disposal of property and
equipment (609) (133)
One-time expenses (980) (1,220)
Stock option market value adjustment (82) -
Management fees (218) (140)
--------- ---------
Income (loss) before income taxes $ 101 $ (1,509)
========= =========
</TABLE>
6. COMPREHENSIVE INCOME
Comprehensive losses were $0.4 million and $1.5 million for the
thirteen weeks ended April 3, 1999 and March 28, 1998, respectively.
<PAGE>
Item 2.
BPC Holding Corporation and Subsidiaries
Management's Discussion and Analysis of Financial Condition
and
Results of Operations
Unless the context discloses 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 should be read in
conjunction with the consolidated financial statements of Holding and
its subsidiaries and the accompanying notes thereto, which
information is included elsewhere herein. 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.
The Company is highly leveraged. The high degree of leverage could
have important consequences, including, but not limited to, the
following: (i) a substantial portion of Berry's cash flow from
operations must be dedicated to the payment of principal and interest
on its indebtedness, thereby reducing the funds available to Berry
for other purposes; (ii) Berry's ability to obtain additional debt
financing in the future for working capital, capital expenditures,
acquisitions, general corporate purposes or other purposes may be
impaired; (iii) certain of Berry's borrowings will be at variable
rates of interest, which will expose Berry to the risk of higher
interest rates; (iv) the indebtedness outstanding under the Credit
Facility is secured by substantially all of the assets of Berry and
matures prior to the maturity of the Notes; (v) Berry is
substantially more leveraged than certain of its competitors, which
may place Berry at a competitive disadvantage, particularly in light
of its acquisition strategy; and (vi) Berry's degree of leverage may
hinder its ability to adjust rapidly to changing market conditions
and could make it more vulnerable in the event of a downturn in
general economic conditions or its business.
<PAGE>
RESULTS OF OPERATIONS
13 WEEKS ENDED APRIL 3, 1999 (THE "QUARTER")
COMPARED TO 13 WEEKS ENDED MARCH 28, 1998 (THE "PRIOR QUARTER")
NET SALES. Net sales increased $10.7 million, or 16%, to $77.5
million for the Quarter from $66.7 million for the Prior Quarter with
an approximate 2% decrease in net selling price due primarily to
competitive market conditions. The addition of Norwich and Knight
provided Quarter net sales of $3.7 million and $4.9 million,
respectively. In addition, housewares sales increased $4.2 million
with strong retail demand, and overcaps sales, excluding Knight,
increased $0.7 million. Drink cup sales for the Quarter were $1.5
million off the Prior Quarter due to a large promotion in the Prior
Quarter. Container sales decreased $1.6 million from the Prior
Quarter due primarily to timing, the Company's decision to exit low
margin business, and competitive pricing as noted above.
GROSS MARGIN. Gross margin increased by $5.5 million to $22.9
million (30% of net sales) for the Quarter from $17.5 million (26% of
net sales) for the Prior Quarter. This increase of 31% includes the
combined impact of the added Norwich and Knight sales volume, the
cyclical impact of lower raw material costs compared to the Prior
Quarter, acquisition integration, and productivity improvement
initiatives. A major focus continues to be the consolidation of
products and business of recent acquisitions to the most efficient
tooling, providing customers with improved products and customer
service. As part of the integration, the Company closed the
Anderson, South Carolina facility, which was acquired in the Venture
Packaging acquistion, in 1998 with the majority of the business being
transferred to the Charlotte, North Carolina plant. In addition, the
Company closed the Arlington Heights facility, which was acquired in
the Knight acquisition, in 1999 with the majority of the business
being transferred to the Woodstock, Illinois plant. Also,
significant productivity improvements have been made, including the
addition of state-of-the-art injection molding equipment, molds and
printing equipment at several of the Company's facilities.
OPERATING EXPENSES. Selling expenses increased by $0.6 million to
$4.2 million for the Quarter from $3.6 million for the Prior Quarter
principally as a result of expanded sales coverage and increased
marketing expenses. General and administrative expenses increased
from $4.4 million for the Prior Quarter to $6.0 million for the
Quarter. The increase of $1.6 million is primarily attributable to
the Norwich and Knight acquisitions and increased accrued bonus
expenses. During the Quarter, one-time transition expenses were $0.5
million related to acquisitions and $0.4 million related to the
shutdown of the Arlington Heights facility. In the Prior Quarter,
one-time transition expenses related to acquisitions were $1.0
million and $0.1 million related to the shutdown of the Reno and
Anderson facilities.
INTEREST EXPENSE. Interest expense increased $0.6 million to $9.3
million for the Quarter compared to $8.7 million for the Prior
Quarter primarily due to additional borrowings under the Credit
Facility (see Note 3) to support the Norwich and Knight acquisitions
(see Note 2).
INCOME TAX. For the Quarter, the Company recorded income tax expense
of $0.2 million compared to income tax expense of $0.1 million for
the Prior Quarter. The Company continues to operate in a net
operating loss carryforward position for Federal income tax purposes.
NET LOSS. The Company recorded a net loss of $0.1 million for the
Quarter compared to a net loss of $1.5 million for the Prior Quarter
for the reasons discussed above.
<PAGE>
LIQUIDITY AND SOURCES OF CAPITAL
Net cash provided by operating activities was $4.1 million for the
Quarter, an increase of $3.0 million from the Prior Quarter. The
increase is primarily the result of improved operating performance
with net income before depreciation and amortization increasing $2.8
million from the Prior Quarter.
Capital spending of $6.7 million for the Quarter represents an
increase of $4.7 million from the Prior Quarter. This Quarter's
capital spending included $1.8 million for buildings and systems,
$2.2 million for molds, $1.3 million for molding and printing
machines, and $1.4 million for accessory equipment and systems.
Net cash provided by financing activities was $4.4 million for the
Quarter compared to $0.9 million for the Prior Quarter. The increase
of $3.4 million can be attributed to increased borrowings under the
Credit Facility's revolving line of credit to finance the increased
capital spending.
The Company anticipates that its cash interest, working capital and
capital expenditure requirements for 1999 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. At April 3,
1999, the Company's cash balance was $4.2 million, and Berry had
unused borrowing capacity under the Credit Facility's borrowing base
of approximately $23.4 million.
The 1994 Indenture and 1998 Indenture restrict, 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 in
June 1999 that was established to pay such interest. However, 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. Upon
expiration, management anticipates that such obligations will only be
met by refinancing the 1996 Notes or raising capital through equity
offerings. No assurance can be given that then-current market
conditions would permit Holding to consummate a refinancing or equity
offering.
<PAGE>
IMPACT OF YEAR 2000
The Company has been working on modifying or replacing portions of
its software since 1991 so that its computer systems will function
properly with respect to dates in the Year 2000 and thereafter.
Because the Company commenced this process early, the costs incurred
to address this issue in any single year have not been significant.
The Company's current business applications are Year 2000 compliant.
Acquired businesses are converted to the Company's applications for
Year 2000 compliance and consistency in applications and reporting.
The most recent acquired business was converted to the Company's
applications on March 1, 1999.
However, the Company is currently in the process of replacing its
current business software with a Year 2000 compliant package. This
replacement is not due to any Year 2000 issues, but is needed to
accommodate the changes the Company has experienced in its business
due to acquisitions in recent years. The cost of this conversion is
anticipated to be approximately $2.0 million. The accounting phase
of this conversion was completed for all plants in January 1999. The
remaining phases are scheduled to be completed by the end of 1999.
Management of the Company believes it has an effective program in
place to resolve all internal Year 2000 issues. An inventory of
computer based systems has been compiled and verified through testing
and supplier verification. All identified non-compliant equipment
and software will be corrected before December 1999. The current
estimated cost for this resolution is $110,000. These systems
include personal computers, postage machines, plant automation and
telephone system components.
The major Year 2000 risks that face the Company are external
suppliers of goods and services. The Company could incur material
disruption in its ability to produce and deliver product should there
be major disruptions in the economy or failure of "key suppliers".
While it is impossible to account for the effectiveness of every
supplier's Year 2000 efforts, the following are the steps that are in
the process of being completed:
Identification of "key suppliers" which include raw material, banking,
transportation, service, and utility providers.
Survey of these suppliers as to their Year 2000 status.
Identification of suppliers not compliant or at risk.
Risk assessment and contingency planning for "key suppliers".
These steps will not be completed until some time during the third
quarter of 1999. This is due to the fact that some of the Company's
suppliers are not targeting Year 2000 compliance until the summer of
1999.
The amount of potential liability and lost revenue due to Year 2000
issues cannot be reasonably estimated at this time. The company will
be continually working throughout the year to minimize any Year 2000
risks.
<PAGE>
Part II. Other Information
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits:
None
(b) Reports on Form 8-K:
None
<PAGE>
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
Berry Sterling Corporation
Aerocon, Inc.
Packerware Corporation
Berry Plastics Design Corporation
Venture Packaging, Inc.
Venture Packaging Midwest, Inc.
Venture Packaging Southeast, Inc.
Knight Plastics, Inc.
May 17, 1999
By: /S/ JAMES M. KRATOCHVIL
-----------------------------------
James M. Kratochvil
Executive Vice President, Chief
Financial Officer, Treasurer and
Secretary of the entities listed
above (Principal Financial
and Accounting Officer)
Nim Holdings Limited
Norwich Injection Moulders Limited
By: /S/ JAMES M. KRATOCHVIL
-----------------------------------
James M. Kratochvil
Director of the entities listed
above (Principal Financial
and Accounting Officer)
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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