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 July 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 33-75706-01
BPC HOLDING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
Delaware 35-1814673
<S> <C> <C>
(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)
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
As of August 2, 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; 57,169 shares of Class B Nonvoting Common Stock; and
16,833 shares of Class C Nonvoting Common Stock.
<PAGE>
BPC HOLDING CORPORATION AND SUBSIDIARIES
FORM 10-Q INDEX
FOR QUARTERLY PERIOD ENDED JULY 3, 1999
PAGE NO.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Operations 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 18
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>
JULY 3, JANUARY 2,
1999 1999
<S> <C> <C> <C>
(UNAUDITED)
Assets
Current assets:
Cash and cash equivalents $ 2,993 $ 2,318
Accounts receivable (less allowance for doubtful
accounts of $1,507 at July 3, 1999 and $1,651 at 40,842 29,951
January 2, 1999)
Inventories:
Finished goods 23,967 23,146
Raw materials and supplies 8,347 8,556
------- -------
32,314 31,702
Prepaid expenses and other receivables 2,575 1,665
Income taxes recoverable 83 577
------- -------
Total current assets 78,807 66,213
Assets held in trust 252 6,679
Property and equipment:
Land 7,762 7,769
Buildings and improvements 39,047 38,960
Machinery, equipment and tooling 140,801 141,054
Automobiles and trucks 1,405 1,386
Construction in progress 21,766 11,780
------- -------
210,781 200,949
Less accumulated depreciation 90,510 80,944
------- -------
120,271 120,005
Intangible assets:
Deferred financing and origination fees, net 9,765 10,327
Covenants not to compete, net 4,068 4,404
Excess of cost over net assets acquired, net 41,971 44,536
Deferred acquisition costs 146 20
------- -------
55,950 59,287
Deferred income taxes 2,758 2,758
Other 371 375
------- -------
Total assets $ 258,409 $ 255,317
======= =======
</TABLE>
<PAGE>
Consolidated Balance Sheets (continued)
(In Thousands of Dollars)
<TABLE>
<CAPTION>
JULY 3, JANUARY 2,
1999 1999
<S> <C> <C> <C>
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 20,664 $ 18,059
Accrued expenses and other liabilities 8,590 9,944
Accrued interest 3,795 4,166
Employee compensation and payroll taxes 12,156 8,953
Income taxes 1,534 941
Current portion of long-term debt 20,297 19,388
------- -------
Total current liabilities 67,036 61,451
Long-term debt, less current portion 300,187 303,910
Accrued dividends on preferred stock 9,188 7,225
Deferred income taxes 472 497
Other liabilities 2,193 2,591
------- -------
379,076 375,674
Stockholders' equity (deficit):
Series A Preferred Stock; 800,000 shares
authorized; 600,000 shares issued and outstanding
(net of discount of $2,624 at July 3, 1999 and 11,947 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 56,842 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; 1,770 shares Class B Nonvoting Common Stock;
and 167 shares Class C Nonvoting Common Stock (296) (280)
Additional paid-in capital 43,502 45,611
Warrants 3,511 3,511
Retained earnings (deficit) (183,801) (185,923)
Accumulated other comprehensive loss (536) (83)
------- -------
Total stockholders' equity (deficit) (120,667) (120,357)
------- -------
Total liabilities and stockholders'equity (deficit) $ 258,409 $ 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 TWENTY-SIX WEEKS ENDED
JULY 3, JUNE 27, JULY 3, JUNE 27,
<S> <C> <C> <C> <C>
1999 1998 1999 1998
(UNAUDITED) (UNAUDITED)
Net sales $82,392 $69,586 $159,852 $136,317
Cost of goods sold 58,259 50,768 112,782 100,016
------- ------- ------- -------
Gross margin 24,133 18,818 47,070 36,301
Operating expenses:
Selling 4,323 3,487 8,553 7,112
General and administrative 5,845 4,400 11,883 8,799
Research and development 633 347 1,175 743
Amortization of intangibles 1,275 828 2,550 1,708
Other 711 1,230 1,667 2,363
------- ------- ------- -------
Operating income 11,346 8,526 21,242 15,576
Other income and expense:
Loss on disposal of property
and equipment 169 297 778 430
------- ------- ------- -------
Income before interest and 11,177 8,229 20,464 15,146
income taxes
Interest:
Expense (8,736) (8,776) (18,022) (17,441)
Income 62 337 162 575
------- ------- ------- -------
Income(loss) before income
taxes 2,503 (210) 2,604 (1,720)
Income tax expense 289 13 482 26
------- ------- ------- -------
Net income (loss) 2,214 (223) 2,122 (1,746)
Preferred stock dividends (998) (869) (1,962) (1,783)
Amortization of preferred stock
discount (73) (73) (146) (146)
------- ------- ------- -------
Net income (loss) attributable to
Common stockholders $ 1,143 $ (1,165) $ 14 $ (3,675)
======= ======= ======= =======
</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
JULY 3, JUNE 27,
1999 1998
<S> <C> <C>
(UNAUDITED)
OPERATING ACTIVITIES
Net income (loss) $ 2,122 $ (1,746)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation 11,560 10,075
Non-cash interest expense 872 884
Amortization 2,550 1,708
Interest funded by assets held in trust 6,427 6,393
Loss on sale of property and equipment 778 430
Changes in operating assets and liabilities:
Accounts receivable, net (11,058) (5,565)
Inventories (636) 1,950
Prepaid expenses and other receivables (910) 534
Other assets (126) (169)
Payables and accrued expenses 4,557 (114)
------- -------
Net cash provided by operating activities 16,136 14,380
INVESTING ACTIVITIES
Additions to property and equipment (13,461) (7,854)
Proceeds from disposal of property and
equipment 408 95
------- -------
Net cash used for investing activities (13,053) (7,759)
FINANCING ACTIVITIES
Proceeds from long-term borrowings 7,672 -
Payments on long-term borrowings (10,058) (6,524)
Payment of refinancing fees - (46)
Purchase of stock from management (16) (59)
------- -------
Net cash used for financing activities (2,402) (6,629)
Effect of exchange rate changes on cash (6) -
------- -------
Net increase in cash and cash equivalents 675 (8)
Cash and cash equivalents at beginning of
period 2,318 2,688
------- -------
Cash and cash equivalents at end of period $ 2,993 $ 2,680
======= =======
</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 Berry's 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 Berry'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 TWENTY-SIX WEEKS ENDED
<S> <C> <C>
JUNE 27, 1998 JUNE 27, 1998
Net sales $ 78,976 $ 155,012
Loss before income taxes (646) (2,956)
Net loss (717) (3,098)
</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>
JULY 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 61,151 71,243
Revolving line of credit 23,835 16,162
Nevada Industrial Revenue Bonds 4,000 4,500
Capital leases 740 561
Debt premium, net 758 832
------- -------
320,484 323,298
Less current portion of long-term debt 20,297 19,388
------- -------
$300,187 $303,910
======= =======
</TABLE>
The current portion of long-term debt consists of $19.6 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)
THE DEBT UNDER OUR CREDIT FACILITY IS GUARANTEED BY BPC HOLDING AND
SUBSTANTIALLY ALL OF OUR SUBSIDIARIES. AS OF JULY 3, 1999, THE CREDIT FACILITY
PROVIDED AN AGGREGATE COMMITMENT OF ABOUT $119.7 MILLION INCLUDING (I) $50.0
MILLION REVOLVING LINE OF CREDIT (WHICH WAS INCREASED BY $20.0 MILLION
CONCURRENTLY WITH THE CARDINAL ACQUISITION - SEE NOTE 7), SUBJECT TO A
BORROWING BASE FORMULA; (II) <pound-sterling>1.5 MILLION REVOLVING LINE OF
CREDIT, SUBJECT TO A BORROWING BASE ("UK REVOLVER"); (III) $56.0 MILLION TERM
LOAN FACILITY; (IV) <pound-sterling>3.6 MILLION TERM LOAN FACILITY ("UK TERM
LOAN"); AND (V) $5.6 MILLION STANDBY LETTER OF CREDIT FACILITY TO SUPPORT OUR
AND OUR SUBSIDIARIES' OBLIGATIONS UNDER OUR NEVADA INDUSTRIAL REVENUE BONDS.
AT JULY 3, 1999, WE HAD UNUSED BORROWING CAPACITY UNDER OUR CREDIT FACILITY'S
REVOLVING LINE OF CREDIT OF ABOUT $28.9 MILLION.
THE CREDIT FACILITY MATURES ON JANUARY 21, 2002 UNLESS PREVIOUSLY TERMINATED BY
US OR BY THE LENDERS UPON AN EVENT OF DEFAULT AS DEFINED IN THE SECURITY
AGREEMENT. THE TERM LOAN FACILITIES REQUIRE PERIODIC PRINCIPAL PAYMENTS,
VARYING IN AMOUNT THROUGH THE MATURITY OF THE FACILITY. SUCH PERIODIC PAYMENTS
WILL AGGREGATE ABOUT $19.0 MILLION FOR FISCAL 1999 AND ABOUT $19.9 MILLION FOR
FISCAL 2000. INTEREST ON BORROWINGS UNDER THE CREDIT FACILITY IS BASED ON
EITHER 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
LIBOR (ADJUSTED FOR RESERVES) PLUS AN APPLICABLE MARGIN OF 2.0%, AT OUR OPTION.
FOLLOWING RECEIPT OF THE QUARTERLY FINANCIAL STATEMENTS, THE AGENT UNDER OUR
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 BERRY
PLASTICS AND OUR 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
DEBT, AND (III) LIMITATIONS ON CAPITAL EXPENDITURES.
<PAGE>
4. BPC HOLDING CORPORATION SUMMARY FINANCIAL INFORMATION
The following summarizes parent company only unaudited financial
information of Holding:
<TABLE>
<CAPTION>
JULY 3, JANUARY 2,
1999 1999
BALANCE SHEET
Current assets $ 371 $ 622
<S> <C> <C> <C>
Assets held in trust 253 6,679
Other noncurrent assets (5,906) (14,193)
Current liabilities 1,197 1,240
Noncurrent liabilities 114,188 112,225
Equity (deficit) (120,667) (120,357)
</TABLE>
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-six Weeks Ended
JULY 3, JUNE 27, JULY 3, JUNE 27,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
Net sales $ - $ - $ - $ -
Cost of goods sold - - - -
Loss before income taxes and
equity in net income (loss) of (3,441) (3,098) (6,861) (6,292)
subsidiary
Net income (loss) 2,214 (223) 2,122 (1,746)
Net income (loss) attributable to
common shareholders 1,143 (1,165) 14 (3,675)
</TABLE>
<PAGE>
5. SEGMENT REPORTING
The Company has two reportable segments: plastic packaging products and
plastic housewares products. The Company's plastic packaging business consists
of three primary market groups: aerosol overcaps, containers, and plastic
drink cups. The Company's plastic 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 Capital, Ltd. 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 Twenty-six Weeks Ended
JULY 3, JUNE 27, JULY 3, JUNE 27,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net sales:
Plastic packaging products $ 75,279 $ 62,259 $ 140,443 $ 120,897
Plastic housewares products 7,113 7,327 19,409 15,420
Adjusted EBITDA:
Plastic packaging products 18,349 14,572 33,912 27,172
Plastic housewares products 982 1,317 3,741 2,896
Reconciliation of Adjusted EBITDA
to loss before income taxes:
Adjusted EBITDA for reportable $ 19,331 $ 15,889 $ 37,653 $ 30,068
segments
Net interest expense (8,674) (8,439) (17,860) (16,866)
Depreciation (5,687) (5,187) (11,560) (10,075)
Amortization (1,275) (828) (2,549) (1,708)
Loss on disposal of property and
equipment (169) (297) (778) (430)
One-time expenses (711) (1,120) (1,667) (2,264)
Stock option market value (94) (10) (198) (10)
adjustment
Management fees (218) (218) (437) (435)
------- ------- ------- -------
Income (loss) before income taxes $ 2,503 $ (210) $ 2,604 $ (1,720)
</TABLE>
6. COMPREHENSIVE INCOME
Comprehensive income (loss) was $1.7 million and $(0.2) million for the
thirteen weeks ended July 3, 1999 and June 27, 1998, respectively, and
$1.6 million and $(1.7) million for the twenty-six weeks ended July 3,
1999 and June 27, 1998, respectively.
<PAGE>
7. SUBSEQUENT EVENTS
On July 6, 1999, Berry acquired all of the outstanding capital stock of
CPI Holding Corporation, the parent company of Cardinal Packaging, Inc.,
for aggregate consideration of approximately $69.5 million. The
purchase was financed through the issuance by Berry of $75.0 million of
11% Senior Subordinated Notes.
<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 JULY 3, 1999 (THE "QUARTER")
COMPARED TO 13 WEEKS ENDED JUNE 27, 1998 (THE "PRIOR QUARTER")
NET SALES. Net sales increased $12.8 million, or 18%, to $82.4 million
for the Quarter from $69.6 million for the Prior Quarter with an
approximate 1% decrease in net selling price due primarily to
contractual decreases associated with lower raw material costs. Plastic
packaging product net sales increased $13.0 million from the Prior
Quarter. Within this segment, the addition of Norwich and Knight
provided Quarter net sales of $3.6 million and $4.7 million,
respectively. In addition, overcaps sales, excluding Knight, increased
$1.4 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 increased $1.7 million from the Prior Quarter. Custom sales,
including tooling, increased $3.2 million from the Prior Quarter with a
large promotion in the Quarter. Plastic housewares product sales for
the Quarter were down $0.2 million from the Prior Quarter as sales were
stronger in the first quarter of 1999.
GROSS MARGIN. Gross margin increased by $5.3 million to $24.1 million
(30% of net sales) for the Quarter from $18.8 million (27% of net sales)
for the Prior Quarter. This increase of 28% includes the combined
impact of the added Norwich and Knight sales volume, acquisition
integration, productivity improvement initiatives, and the cyclical
impact of lower raw material costs compared to the Prior Quarter. 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 in
1998 with the majority of the business being transferred to the
Charlotte, North Carolina plant. In addition, the Company closed the
Arlington Heights, Illinois 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 $0.8 million to $4.3
million for the Quarter from $3.5 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 $5.8 million for the Quarter. The
increase of $1.4 million is primarily attributable to the Norwich
Moulders and Knight acquisitions and increased accrued bonus expenses.
During the Quarter, one-time transition expenses were $0.5 million
related to acquisitions and $0.2 million related to the shutdown of the
Arlington Heights facility. In the Prior Quarter, one-time transition
expenses related to the shutdown of the Anderson facility were $1.2
million.
INTEREST EXPENSE. Interest expense decreased $0.1 million to $8.7
million for the Quarter compared to $8.8 million for the Prior Quarter
primarily due to term loan principal reductions.
INCOME TAX. For the Quarter, the Company recorded income tax expense of
$0.3 million. The Company continues to operate in a net operating loss
carryforward position for Federal income tax purposes.
<PAGE>
NET INCOME (LOSS). The Company recorded net income of $2.2 million for
the Quarter compared to a net loss of $0.2 million for the Prior Quarter
for the reasons discussed above.
26 WEEKS ENDED JULY 3, 1999 ("YTD")
COMPARED TO 26 WEEKS ENDED JUNE 27, 1998 ("PRIOR YTD")
NET SALES. Net sales increased $23.6 million, or 17%, to $159.9
million for the YTD from $136.3 million for the prior YTD with an
approximate 2% decrease in net selling prices due primarily to
contractual decreases associated with lower raw material costs. Plastic
packaging product net sales increased $19.6 million from the prior YTD.
Within this segment, the addition of Norwich and Knight provided net
sales for the YTD of $7.3 million and $9.6 million, respectively. In
addition, overcaps sales, excluding Knight, increased $2.1 million.
Drink cup sales for the YTD were $3.0 million off the prior YTD due to a
$3.5 million promotion in the prior YTD. Container sales increased $0.1
million from the prior YTD despite the Company's decision to exit
certain low margin business. Custom sales, including tooling, increased
$3.4 million from the prior YTD with a large promotion in the YTD.
Plastic housewares product sales for the YTD increased $4.0 million from
the prior YTD due to strong internal growth including several new
products.
GROSS MARGIN. Gross margin increased by $10.8 million to $47.1
million (29% of net sales) for the YTD from $36.3 million (27% of net
sales) for the prior YTD. This increase of 30% includes the combined
impact of the added Norwich and Knight sales volume, acquisition
integration, productivity improvement initiatives, and the cyclical
impact of lower raw material costs compared to the Prior Quarter. 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 in
1998 with the majority of the business being transferred to the
Charlotte, North Carolina plant. In addition, the Company closed the
Arlington Heights, Illinois 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 $1.5 million to
$8.6 million for the YTD from $7.1 million for the prior YTD principally
as a result of expanded sales coverage and increased marketing expenses.
General and administrative expenses increased by $3.1 million to $11.9
million for the YTD from $8.8 million for the prior YTD. The increase
is primarily attributable to the Norwich Moulders and Knight
acquisitions and increased accrued bonus expenses. YTD one-time
transition expenses include $0.6 million related to the shutdown of the
Anderson and Arlington Heights facilities and $1.1 million related to
acquisitions. One-time transition expenses for prior YTD were $1.1
million related to acquisitions and $1.3 million related to the Anderson
plant consolidation.
INTEREST EXPENSE. Interest expense increased $0.6 million to
$18.0 million for the YTD compared to $17.4 million for the prior YTD
primarily due to additional borrowings to support the Norwich Moulders
and Knight acquisitions.
<PAGE>
INCOME TAX. The Company's income tax expense was $0.5 million for
the YTD. The Company continues to operate in a net operating loss
carryforward position for Federal income tax purposes.
NET INCOME (LOSS). Net income for the YTD of $2.1 million
improved $3.8 million from a net loss of $1.7 million for the prior YTD
for the reasons discussed above.
LIQUIDITY AND SOURCES OF CAPITAL
Net cash provided by operating activities was $16.1 million for the YTD,
an increase of $1.7 million from the prior YTD. The increase is
primarily the result of improved operating performance with income
before depreciation and amortization increasing $6.1 million from the
prior YTD. Net working capital changes (defined as accounts receivable,
inventories, prepaid expenses, other receivables, accounts payable and
accrued expenses) decreased the YTD net cash $4.8 million from the prior
YTD due to the Company's growth.
YTD capital spending of $13.5 million included $5.5 million for molds,
$0.7 million for molding and printing machines, $4.4 million for
buildings and systems, and $2.9 million for accessory equipment and
systems. 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 July 3,
1999, the Company's cash balance was $3.0 million, and Berry had unused
borrowing capacity under the Credit Facility's borrowing base of
approximately $28.9 million.
The 1994 Indenture, 1998 Indenture and 1999 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 net income 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 (other than the Cardinal Acquisition) 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 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On July 5, 1999, Holding issued 327 shares of its Class B Non-
Voting Common Stock, $.01 par value, to three members of
management of Berry at $170.00 per share, for aggregate
proceeds of $55,590 (the "Employee Stock"). There was no
underwriter for the securities. The securities were
privately placed pursuant to the exemption from
registration granted under Rule 505 ("Rule 505") of
Regulation D promulgated under the Securities Act of 1933,
as amended. The offering was made to less than 35 non-
accredited investors, the offering was less than
$5,000,000, no general solicitation was made and the
issuer complied with the provisions of Rule 502 of
Regulation D, including the disclosure requirements
thereunder. The Employee Stock was issued for cash, and
was issued to provide an incentive for management
employees.
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.
BPC Holding Corporation
August 9, 1999
By: /S/ JAMES M. KRATOCHVIL
James M. Kratochvil
Executive Vice President, Chief
Financial Officer and Secretary of
BPC Holding Corporation (Principal
Financial and Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-END> JUL-03-1999
<CASH> 2,993
<SECURITIES> 0
<RECEIVABLES> 40,842
<ALLOWANCES> 1,507
<INVENTORY> 32,314
<CURRENT-ASSETS> 78,807
<PP&E> 210,781
<DEPRECIATION> 90,510
<TOTAL-ASSETS> 258,409
<CURRENT-LIABILITIES> 67,036
<BONDS> 300,187
0
16,947
<COMMON> 6
<OTHER-SE> (137,620)
<TOTAL-LIABILITY-AND-EQUITY> 258,409
<SALES> 159,852
<TOTAL-REVENUES> 0
<CGS> 112,782
<TOTAL-COSTS> 138,610
<OTHER-EXPENSES> 778
<LOSS-PROVISION> 473
<INTEREST-EXPENSE> 17,860
<INCOME-PRETAX> 2,604
<INCOME-TAX> 482
<INCOME-CONTINUING> 2,122
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,122
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>