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 September 30, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from___________________to__________________
Commission File Number 33-75706-01
BPC HOLDING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
Delaware 35-1814673
<S> <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
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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
1
<PAGE>
As of October 1, 2000, 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; 56,509 shares of Class B Nonvoting Common Stock; and
16,833 shares of Class C Nonvoting Common Stock. As of October 1, 2000,
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 Berry Plastics Technical Services, 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 Berry Plastics U.K.
Limited, 100 shares of the Common Stock, $.01 par value, of Knight Plastics,
Inc., 100 shares of the Common Stock, $.01 par value, of CPI Holding
Corporation, 100 shares of the Common Stock, $.01 par value, of Cardinal
Packaging, Inc., 2 Ordinary Shares of <pound-sterling>1 par value, of
Norwich Acquisition Limited, and 100 shares of the Common Stock, $.01 par
value, of Berry Plastics Acquisition Corporation II, 100 shares of the
Common Stock, $.01 par value, of Poly-Seal Corporation, 100 shares of the
Common Stock, $.01 par value, of Berry Plastics Acquisition Corporation III,
and quota capital of EURO 10,400 of CBP Holdings, S.r.1., 100,000 Ordinary
Shares of ITL 10,000 par value of Capsol S.p.a. and quota capital of ITL
40,000,000 of Ociesse S.r.1.
2
<PAGE>
BPC HOLDING CORPORATION AND SUBSIDIARIES
FORM 10-Q INDEX
FOR QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
PAGE NO.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets 4
Consolidated Statements of Operations 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 14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURE 20
3
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
BPC Holding Corporation and Subsidiaries
Consolidated Balance Sheets
(In Thousands of Dollars)
<TABLE>
<CAPTION>
SEPTEMBER 30, JANUARY 1,
2000 2000
<S> <C> <C> <C>
(UNAUDITED)
Assets
Current assets:
Cash and cash equivalents $ 9,792 $ 2,546
Accounts receivable (less allowance for doubtful
accounts of $1,740 at September 30, 2000 and $1,386
at January 1, 2000) 50,321 37,507
Inventories:
Finished goods 38,822 31,676
Raw materials and supplies 13,320 15,016
---------- ----------
52,142 46,692
Prepaid expenses and other receivables 7,492 2,082
Income taxes recoverable 1,148 45
---------- ----------
Total current assets 120,895 88,872
Property and equipment:
Land 8,827 8,556
Buildings and improvements 54,871 48,080
Machinery, equipment and tooling 200,446 172,082
Construction in progress 33,017 18,170
---------- ----------
297,161 246,888
Less accumulated depreciation 118,028 100,096
---------- ----------
179,133 146,792
Intangible assets:
Deferred financing and origination fees, net 11,150 11,571
Covenants not to compete, net 3,466 3,723
Excess of cost over net assets acquired, net 102,689 87,614
---------- ----------
117,305 102,908
Other 918 2,235
---------- ----------
Total assets $ 418,251 $ 340,807
========== ==========
</TABLE>
4
<PAGE>
Consolidated Balance Sheets (continued)
(In Thousands of Dollars)
<TABLE>
<CAPTION>
SEPTEMBER 30, JANUARY 1,
2000 2000
<S> <C> <C>
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 24,199 $ 25,798
Accrued expenses and other liabilities 16,832 9,590
Accrued interest 13,807 8,108
Employee compensation and payroll taxes 14,228 13,461
Income taxes 130 279
Current portion of long-term debt 22,195 21,109
---------- ----------
Total current liabilities 91,391 78,345
Long-term debt, less current portion 439,099 382,880
Accrued dividends on preferred stock 15,587 11,001
Deferred income taxes 447 503
Other liabilities 1,413 1,549
---------- ----------
547,937 474,278
Stockholders' equity (deficit):
Series A Preferred Stock; 600,000 shares
authorized; issued and outstanding (net of
discount of $2,258 at September 30, 2000 and
$2,478 at January 1, 2000) 12,313 12,093
Series A-1 Preferred Stock, 1,400,000 shares
authorized; 1,000,000 issued and outstanding (net
of discount of $5,584 at September 30, 2000) 19,416 -
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 56,509 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; 2,103 shares Class B Nonvoting Common
Stock; and 167 shares Class C Nonvoting Common
Stock (369) (256)
Additional paid-in capital 36,468 41,559
Warrants 9,386 3,511
Retained earnings (deficit) (210,987) (195,061)
Accumulated other comprehensive loss (919) (323)
---------- ----------
Total stockholders' equity (deficit) (129,686) (133,471)
---------- ----------
Total liabilities and stockholders' equity
(deficit) $ 418,251 $ 340,807
========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE>
BPC Holding Corporation and Subsidiaries
Consolidated Statements of Operations
(In Thousands of Dollars)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
SEPTEMBER 30, OCTOBER 2, SEPTEMBER 30, OCTOBER 2,
2000 1999 2000 1999
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales $ 105,645 $ 90,105 $ 310,014 $ 249,956
Cost of goods sold 80,603 68,458 237,508 181,240
---------- ---------- ---------- ----------
Gross margin 25,042 21,647 72,506 68,716
Operating expenses:
Selling 5,822 4,630 16,573 13,183
General and administrative 5,541 5,336 18,233 17,220
Research and development 584 537 2,146 1,712
Amortization of intangibles 3,025 2,432 7,503 4,981
Other expenses 632 1,224 4,907 2,890
---------- ---------- ---------- ----------
Operating income 9,438 7,488 23,144 28,730
Other expenses:
(Gain) loss on disposal of property
and equipment (62) 372 553 1,150
---------- ---------- ---------- ----------
Income before interest, taxes, and
extraordinary item 9,500 7,116 22,591 27,580
Interest:
Expense (13,470) (11,516) (37,516) (29,539)
Income 23 41 76 204
---------- ---------- ---------- ----------
Loss before income taxes and
extraordinary item (3,947) (4,359) (14,849) (1,755)
Income taxes 30 175 55 659
---------- ---------- ---------- ----------
Net loss before extraordinary item (3,977) (4,534) (14,904) (2,414)
Extraordinary item (less applicable
income taxes of $0) - - 1,022 -
---------- ---------- ---------- ----------
Net loss (3,977) (4,534) (15,926) (2,414)
Preferred stock dividends (1,970) (1,034) (4,586) (2,996)
Amortization of preferred stock
discount (292) (73) (511) (219)
---------- ---------- ---------- ----------
Net loss attributable to common
stockholders $ (6,239) $ (5,641) $ (21,023) $ (5,629)
========== ========== ========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
6
<PAGE>
BPC Holding Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands of Dollars)
<TABLE>
<CAPTION> THIRTY-NINE WEEKS ENDED
SEPTEMBER 30, OCTOBER 2,
2000 1999
(UNAUDITED)
OPERATING ACTIVITIES
<S> <C> <C>
Net loss $ (15,926) $ (2,414)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation 22,743 18,085
Non-cash interest expense 13,113 11,654
Amortization 7,503 4,981
Write-off deferred financing and
origination fees 1,022 -
Loss on sale of property and equipment 553 1,150
Changes in operating assets and liabilities:
Accounts receivable, net (7,337) (7,079)
Inventories 3,567 706
Prepaid expenses and other receivables (6,779) (1,391)
Other assets 1,317 (4,757)
Payables and accrued expenses (173) 11,462
---------- ----------
Net cash provided by operating activities 19,603 32,397
INVESTING ACTIVITIES
Additions to property and equipment (23,662) (25,580)
Proceeds from disposal of property
and equipment 1,197 455
Acquisitions of businesses, net
of cash acquired (64,348) (71,293)
---------- ----------
Net cash used for investing activities (86,813) (96,418)
FINANCING ACTIVITIES
Proceeds from long-term borrowings 64,974 81,333
Payments on long-term borrowings (14,411) (14,520)
Debt origination costs (1,245) (3,000)
Proceeds from issuance of common stock - 56
Issuance of preferred stock and warrants 25,000 -
Purchase of treasury stock (112) (16)
---------- ----------
Net cash provided by financing activities 74,206 63,853
Effect of exchange rate changes on cash 250 (61)
---------- ----------
Net increase in cash and cash equivalents 7,246 (229)
Cash and cash equivalents at beginning
of period 2,546 2,318
---------- ----------
Cash and cash equivalents at end of period $ 9,792 $ 2,089
========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
7
<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., BERRY PLASTICS TECHNICAL SERVICES, INC., NIM HOLDINGS LIMITED, BERRY
PLASTICS U.K. LIMITED, KNIGHT PLASTICS, INC., CPI HOLDING CORPORATION,
CARDINAL PACKAGING, INC., NORWICH ACQUISITION LIMITED, BERRY PLASTICS
ACQUISITION CORPORATION II, BERRY PLASTICS ACQUISITION CORPORATION III, AND
POLY-SEAL CORPORATION. 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 1, 2000.
CERTAIN AMOUNTS ON THE 1999 FINANCIAL STATEMENTS HAVE BEEN RECLASSIFIED TO
CONFORM WITH THE 2000 PRESENTATION.
1. Acquisitions
On May 9, 2000, Berry acquired all of the outstanding capital stock of Poly-
Seal Corporation ("Poly-Seal") for aggregate consideration of approximately
$58.0 million. The purchase price and allocation of such to the purchased
assets and liabilities is preliminary and subject to completion of Poly-
Seal's working capital accounts. The purchase was financed through the
issuance by Holding of $25.0 million of 14% preferred stock (see Note 7) and
additional borrowings under the Credit Facility (See Note 3). The
operations of Poly-Seal are included in Berry's operations since the
acquisition date using the purchase method of accounting.
On July 6, 1999, Berry acquired all of the outstanding capital stock of CPI
Holding Corporation ("Cardinal"), the parent company of Cardinal Packaging,
Inc. for aggregate consideration of approximately $72.0 million. The
purchase was financed through the issuance by Berry of $75.0 million of 11%
Senior Subordinated Notes. The operations of Cardinal are included in
Berry's operations since the acquisition date using the purchase method of
accounting.
<PAGE>
8
THE PRO FORMA RESULTS LISTED BELOW ARE UNAUDITED AND REFLECT PURCHASE
ACCOUNTING ADJUSTMENTS ASSUMING THE CARDINAL AND POLY-SEAL ACQUISITIONS
OCCURRED ON JANUARY 3, 1999.
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
SEPTEMBER 30, OCTOBER 2, SEPTEMBER 30, OCTOBER 2,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net sales $ 105,645 $ 102,557 $ 327,078 $316,561
Loss before income taxes and
extraordinary item (3,947) (4,188) (18,104) (6,229)
NET LOSS ATTRIBUTABLE TO COMMON
STOCKHOLDERS (6,239) (6,506) (25,833) (13,212)
</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>
SEPTEMBER 30, JANUARY 1,
2000 2000
<S> <C> <C>
Holding 12.50% Senior Secured Notes $119,373 $111,956
BERRY 12.25% SENIOR SUBORDINATED NOTES 125,000 125,000
BERRY 11% SENIOR SUBORDINATED NOTES 75,000 75,000
SECOND LIEN SENIOR CREDIT FACILITY 25,000 -
Term loans 78,722 55,221
REVOLVING LINES OF CREDIT 33,801 31,649
NEVADA INDUSTRIAL REVENUE BONDS 3,500 4,000
CAPITAL LEASES 326 479
DEBT PREMIUM, NET 572 684
--------- ---------
461,294 403,989
LESS CURRENT PORTION OF LONG-TERM DEBT 22,195 21,109
--------- ---------
$439,099 $382,880
========= =========
</TABLE>
THE CURRENT PORTION OF LONG-TERM DEBT CONSISTS OF $21.6 MILLION OF MONTHLY
INSTALLMENTS ON THE TERM LOANS, A $0.5 MILLION REPAYMENT OF THE INDUSTRIAL
BONDS AND THE MONTHLY PRINCIPAL PAYMENTS RELATED TO CAPITAL LEASE
OBLIGATIONS.
9
<PAGE>
IN CONNECTION WITH THE ACQUISITION OF POLY-SEAL, BERRY AMENDED ITS FINANCING
AND SECURITY AGREEMENT WITH BANK OF AMERICA (THE "CREDIT FACILITY") TO
INCREASE THE AMOUNT OF FUNDS AVAILABLE WITHIN THE FACILITY. AT SEPTEMBER
30, 2000, THE CREDIT FACILITY PROVIDED FOR AN AGGREGATE PRINCIPAL AMOUNT OF
APPROXIMATELY $155.3 MILLION CONSISTING OF (I) A $70.0 MILLION REVOLVING
LINE OF CREDIT, SUBJECT TO A BORROWING BASE FORMULA, (II) A $2.4 MILLION
REVOLVING LINE OF CREDIT IN THE U.K. ("UK REVOLVER"), SUBJECT TO A BORROWING
BASE FORMULA, (III) A $74.9 MILLION TERM LOAN FACILITY, (IV) A $3.8 MILLION
TERM LOAN FACILITY IN THE U.K. ("UK TERM LOAN") AND (V) A $4.2 MILLION
STANDBY LETTER OF CREDIT FACILITY TO SUPPORT THE COMPANY'S AND ITS
SUBSIDIARIES' OBLIGATIONS UNDER THE NEVADA BONDS. AS A RESULT OF AMENDING
THE CREDIT FACILITY, A PORTION OF THE DEFERRED FINANCING AND ORIGINATION
FEES RELATED TO THE CREDIT FACILITY HAVE BEEN CHARGED TO EXPENSE AS AN
EXTRAORDINARY ITEM. AT SEPTEMBER 30, 2000, THE COMPANY HAD UNUSED BORROWING
CAPACITY UNDER THE CREDIT FACILITY'S REVOLVING LINE OF CREDIT OF
APPROXIMATELY $34.7 MILLION. THE INDEBTEDNESS UNDER THE CREDIT FACILITY IS
GUARANTEED BY HOLDING, BERRY, AND ALL OF BERRY'S 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 ENTITIES.
ON JULY 17, 2000, BERRY OBTAINED A SECOND LIEN SENIOR CREDIT FACILITY FOR AN
AGGREGATE PRINCIPAL AMOUNT OF $25.0 MILLION, RESULTING IN NET PROCEEDS OF
$24.3 MILLION AFTER FEES AND EXPENSES. THE PROCEEDS WERE UTILIZED TO REDUCE
THE COMPANY'S REVOLVING LINE OF CREDIT. THE $25.0 MILLION PRINCIPAL AMOUNT
IS DUE UPON THE FACILITY'S MATURITY IN JULY 2002.
4. BPC HOLDING CORPORATION SUMMARY FINANCIAL INFORMATION
The following summarizes parent company only unaudited financial information
of Holding:
<TABLE>
<CAPTION>
SEPTEMBER 30, JANUARY 1,
2000 2000
<S> <C> <C>
BALANCE SHEET
Current assets $ 324 $ 703
Other noncurrent assets 9,851 (10,184)
Current liabilities 4,900 1,033
Noncurrent liabilities 134,961 122,957
Equity (deficit) (129,686) (133,471)
</TABLE>
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
SEPTEMBER 30, OCTOBER 2, SEPTEMBER 30, OCTOBER 2,
2000 1999 2000 1999
<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 subsidiary (4,148) (3,611) (11,974) (10,472)
Net loss (3,977) (4,534) (15,926) (2,414)
Net loss attributable to common
shareholders (6,239) (5,641) (21,023) (5,629)
</TABLE>
10
<PAGE>
1. Segment Reporting
THE COMPANY HAS TWO REPORTABLE SEGMENTS: PACKAGING PRODUCTS AND HOUSEWARES
PRODUCTS. THE COMPANY'S PACKAGING BUSINESS CONSISTS OF THREE PRIMARY MARKET
GROUPS: OVERCAPS AND CLOSURES, CONTAINERS, AND 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, and (iii) management fees and
reimbursed expenses paid to First Atlantic ("Adjusted EBITDA"). The
Company's reportable segments are business units that offer different
products to different markets.
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-nine Weeks Ended
SEPTEMBER 30, OCTOBER 2, SEPTEMBER 30, OCTOBER 2,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net sales:
Packaging products $ 101,558 $ 87,329 $ 287,138 $ 227,771
HOUSEWARES PRODUCTS 4,087 2,776 22,876 22,185
ADJUSTED EBITDA:
PACKAGING PRODUCTS 21,481 17,496 56,025 51,411
HOUSEWARES PRODUCTS 267 414 3,183 4,155
RECONCILIATION OF ADJUSTED EBITDA
TO LOSS BEFORE INCOME TAXES:
ADJUSTED EBITDA FOR REPORTABLE
SEGMENTS $ 21,748 $ 17,910 $ 59,208 $ 55,566
NET INTEREST EXPENSE (13,447) (11,475) (37,440) (29,335)
DEPRECIATION (8,356) (6,525) (22,743) (18,085)
AMORTIZATION (3,025) (2,432) (7,503) (4,981)
GAIN (LOSS) ON DISPOSAL OF PROPERTY
AND EQUIPMENT 62 (372) (553) (1,150)
ONE-TIME EXPENSES (711) (1,224) (5,060) (2,890)
STOCK OPTION MARKET VALUE ADJUSTMENT - (23) (104) (225)
MANAGEMENT FEES (218) (218) (654) (655)
---------- ---------- ---------- ----------
LOSS BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM $ (3,947) $ (4,359) $(14,849) $ (1,755)
========== ========== ========== ==========
</TABLE>
One time-expenses represent non-recurring expenses that relate to recently
acquired businesses, plant consolidations, and litigation associated with a
drink cup patent.
6. COMPREHENSIVE INCOME (LOSS)
Comprehensive income (losses) were $(4.1) million and $4.6 million for the
thirteen weeks ended September 30, 2000 and October 2, 1999, respectively
and $(16.8) million and $2.5 million for the thirty-nine weeks ended
September 30, 2000 and October 2, 1999, respectively.
11
<PAGE>
7. CHANGES IN OWNERS EQUITY
In connection with the Poly-Seal acquisition on May 9, 2000, Holding issued
1,000,000 shares of Series A-1 Preferred Stock to Chase Venture Capital
Associates, LLC and The Northwestern Mutual Life Insurance Company
(collectively, the "Purchasers"). The Series A-1 Preferred Stock has a
stated value of $25 per share, and dividends accrue at a rate of 14% per
annum and will accumulate until declared and paid. The Series A-1 Preferred
Stock ranks pari-passu to the Series A Preferred Stock and prior to all
other capital stock of Holding. In addition, Warrants to purchase an
aggregate of 25,997 shares of Class B Non-Voting Common Stock at $0.01 per
share were issued to the Purchasers.
2. SUBSEQUENT EVENTS
ON OCTOBER 4, 2000, BERRY, THROUGH ITS ITALIAN SUBSIDIARY CBP HOLDINGS
S.R.1., ACQUIRED ALL OF THE OUTSTANDING CAPITAL STOCK OF CAPSOL S.P.A.,
HEADQUARTERED IN CORNATE D'ADDA, NEAR MILAN, ITALY AND THE WHOLE QUOTA
CAPITAL OF A RELATED COMPANY, OCIESSE S.R.L., FOR AGGREGATE CONSIDERATION OF
APPROXIMATELY $14.0 MILLION. THE PURCHASE WAS FINANCED THROUGH BORROWINGS
UNDER THE CREDIT FACILITY.
13
<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 the Company's cash flow from operations must be
dedicated to the payment of principal and interest on its indebtedness,
thereby reducing the funds available to the Company for other purposes; (ii)
the Company'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 the Company's
borrowings will be at variable rates of interest, which will expose the
Company to the risk of higher interest rates; (iv) the Company is
substantially more leveraged than certain of its competitors, which may
place the Company at a competitive disadvantage, particularly in light of
its acquisition strategy; and (v) the Company'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.
14
<PAGE>
RESULTS OF OPERATIONS
13 WEEKS ENDED SEPTEMBER 30, 2000 (THE "QUARTER")
COMPARED TO 13 WEEKS ENDED OCTOBER 2, 1999 (THE "PRIOR QUARTER")
NET SALES. Net sales increased $15.5 million, or 17%, to $105.6 million for
the Quarter from $90.1 million for the Prior Quarter with an approximate 7%
increase in net selling price due primarily to increased raw material costs.
Packaging product net sales increased $14.2 million from the Prior Quarter.
Within this segment, the addition of Poly-Seal provided Quarter net sales of
approximately $12.0 million. Excluding Poly-Seal, overcaps and closures
sales decreased $0.4 million from the Prior Quarter. Drink cup sales for
the Quarter increased $1.1 million compared to the Prior Quarter. Container
sales increased $6.0 million from the Prior Quarter due primarily to
increased selling prices as noted above. Custom sales decreased $4.4
million from the Prior Quarter because of a large promotion in the Prior
Quarter. Housewares product sales for the Quarter were up $1.3 million from
the Prior Quarter.
GROSS MARGIN. Gross margin increased by $3.4 million to $25.0 million (24%
of net sales) for the Quarter from $21.6 million (24% of net sales) for the
Prior Quarter. This increase of 16% includes the combined impact of the
added Poly-Seal sales volume, acquisition integration, productivity
improvement initiatives, and the cyclical impact of higher raw material
costs compared to the Prior Quarter. The cost of the Company's primary raw
material, resin, was more than 15% higher than 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 has announced the closing of its York, Pennsylvania and Minneapolis,
Minnesota (acquired in the Cardinal acquisition) facilities to take place by
the end of 2000. The Company also closed its Ontario, California facility
(acquired in the Cardinal acquisition) in the third quarter of 1999. In
addition, the Company made two configuration changes that were completed in
the fourth quarter of 1999 with the Minneapolis, Minnesota and Iowa Falls,
Iowa locations closing their molding operations. The business from these
locations is distributed throughout Berry's facilities. Also, significant
productivity improvements were made during the year, including the addition
of state-of-the-art injection molding equipment, molds and printing
equipment at several of the Company's facilities.
OPERATING EXPENSES. Selling expenses increased by $1.2 million to $5.8
million for the Quarter from $4.6 million for the Prior Quarter principally
as a result of the Poly-Seal acquisition. General and administrative
expenses increased from $5.3 million for the Prior Quarter to $5.5 million
for the Quarter. The increase of $0.2 million is primarily attributable to
the Poly-Seal acquisition partially offset by decreased accrued bonus
expenses. During the Quarter, one-time transition expenses were $0.4
million related to the shutdown and reorganization of facilities and $0.2
million related to acquisitions. In the Prior Quarter, one-time transition
expenses were $0.8 million related to acquisitions and $0.4 million related
to facility reorganizations.
INTEREST EXPENSE. Interest expense increased $2.0 million to $13.5 million
for the Quarter compared to $11.5 million for the Prior Quarter primarily
due to the increase in borrowings under the Credit Facility to fund the
Poly-Seal acquisition.
15
<PAGE>
INCOME TAX. For the Quarter, the Company recorded income tax expense of
$30,000 compared to $175,000 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 $4.0 million for the Quarter
compared to a net loss of $4.5 million for the Prior Quarter for the reasons
discussed above.
39 WEEKS ENDED SEPTEMBER 30, 2000 ("YTD")
COMPARED TO 39 WEEKS ENDED OCTOBER 2, 1999 ("PRIOR YTD")
NET SALES. Net sales increased $60.0 million, or 24%, to $310.0 million for
the YTD from $250.0 million for the Prior YTD with an approximate 7%
increase in net selling price due primarily to increased raw material costs.
Packaging product net sales increased $59.4 million from the Prior YTD.
Within this segment, the addition of Cardinal and Poly-Seal provided net
sales for the YTD of approximately $32.0 million and $18.7 million,
respectively. Excluding Poly-Seal, overcaps and closures sales decreased
$0.7 million. Drink cup sales for the YTD were $2.6 million higher than the
Prior YTD with the addition of a significant new product. Excluding
Cardinal, container sales increased $15.0 million from the Prior YTD,
primarily due to increased selling prices as noted above. Custom sales
decreased $8.2 million from the Prior YTD with a large promotion in the
Prior YTD. Housewares sales for the YTD increased $0.7 million from the
Prior YTD despite the Company's decision to exit a low margin account.
Within this segment, Cardinal provided sales for the YTD of $1.8 million.
GROSS MARGIN. Gross margin increased by $3.8 million to $72.5 million (23%
of net sales) for the YTD from $68.7 million (27% of net sales) for the
Prior YTD. This increase of 6% includes the combined impact of the added
Cardinal and Poly-Seal sales volume, acquisition integration, productivity
improvement initiatives, and the cyclical impact of higher raw material
costs compared to the Prior YTD. The cost of the Company's primary raw
material, resin, has increased over 34% from the Prior YTD. 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 has announced the closing of its York, Pennsylvania and Minneapolis,
Minnesota (acquired in the Cardinal acquisition) facilities to take place by
the end of 2000. Additionally, the Company closed its Arlington Heights,
Illinois (acquired in the Knight acquisition) facility in the first quarter
of 1999 and its Ontario, California facility (acquired in the Cardinal
acquisition) in the third quarter of 1999. In addition, the Company made
two configuration changes that were completed in the fourth quarter of 1999
with the Minneapolis, Minnesota and Iowa Falls, Iowa locations closing their
molding operations. The business from these locations are distributed
throughout Berry's facilities. Also, significant productivity improvements
were made during the year, including the addition of state-of-the-art
injection molding equipment, molds and printing equipment at several of the
Company's facilities.
OPERATING EXPENSES. Selling expenses increased by $3.4 million to $16.6
million for the YTD from $13.2 million for the Prior YTD principally as a
result of the Cardinal and Poly-Seal acquisitions. General and
administrative expenses increased by $1.0 million to $18.2 million for the
YTD from $17.2 million for the Prior YTD. The increase is primarily
attributable to the Cardinal and Poly-Seal acquisitions partially offset by
decreased accrued bonus expenses. YTD one-time transition expenses include
$3.7 million related to the shutdown and reorganization of facilities and
$1.2 million related to acquisitions. One-time transition expenses for
Prior YTD were $1.0 million related to facility reorganizations and $1.9
million related to acquisitions.
16
<PAGE>
INTEREST EXPENSE. Interest expense increased $8.0 million to $37.5 million
for the YTD compared to $29.5 million for the Prior YTD primarily due to the
issuance of $75.0 million of 11% Senior Subordinated Notes to support the
Cardinal acquisition and an increase in borrowings under the Credit Facility
to support the Poly-Seal acquisition.
INCOME TAX. The Company's income tax expense was $55,000 for the YTD
compared to $204,000 for the Prior YTD. The Company continues to operate in
a net operating loss carryforward position for Federal income tax purposes.
EXTRAORDINARY ITEM. As a result of amending the Credit Facility, $1.0
million of deferred financing and origination fees related to the Credit
Facility have been charged to expense for the YTD as an extraordinary item.
NET LOSS. Net loss for the YTD of $15.9 million was a decrease of $13.5
million from a net loss of $2.4 million for the Prior YTD for the reasons
discussed above.
LIQUIDITY AND SOURCES OF CAPITAL
Net cash provided by operating activities was $19.6 million for the YTD, a
decrease of $12.8 million from the Prior YTD. The decrease is primarily the
result of timing of working capital as the changes in operating assets and
liabilities decreased $12.2 million from the Prior YTD.
Net cash used for investing activities decreased from $96.4 million in the
Prior YTD to $86.8 million for the YTD principally as a result of the
difference in the acquisition price of Cardinal versus Poly-Seal. YTD
capital spending of $23.6 million included $12.6 million for molds, $3.4
million for molding and printing machines, $5.8 million for buildings and
systems, and $1.8 million for accessory equipment and systems.
Net cash provided by financing activities was $74.2 million for the YTD
compared to net cash provided by financing activities of $63.9 million for
the Prior YTD. The increase of $10.3 million can be primarily attributed to
the issuance of the Series A-1 Preferred Stock to finance the Poly-Seal
acquisition.
The Company anticipates that its cash interest, working capital and capital
expenditure requirements for 2000 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 funds available under the Credit Facility.
However, the Company cannot predict its future results of operations. At
September 30, 2000, the Company's cash balance was $9.8 million, and Berry
had unused borrowing capacity under the Credit Facility's borrowing base of
approximately $34.7 million.
17
<PAGE>
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 operating results of Berry, management
anticipates that it will be unable to generate sufficient cash flow to
permit a dividend or payment under the tax sharing agreement to Holding in
an amount sufficient to meet Holding's interest payment obligations under
the 1996 Notes. Interest on the 1996 Notes is payable semi-annually on
June 15 and December 15 of each year. 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. On June 15, 2000, Holding issued approximately
$7.4 million aggregate principal amount of additional 1996 Notes in
satisfaction of its interest obligation. After June 15, 2001 or in the
event that Holding does not pay interest in additional notes, management
anticipates that such interest obligations will only be met by refinancing
the 1996 Notes or raising capital through equity offerings. We cannot
assure you that then-current market conditions would permit Holding to
consummate a refinancing or equity offering.
18
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is party to various legal proceedings
involving routine claims which are incidental to its business.
Although the Company's legal and financial liability with
respect to such proceedings cannot be estimated with
certainty, the Company believes that any ultimate liability
would not be material to its financial condition.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
None
(b) Reports on Form 8-K:
None.
19
<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
November 13, 2000
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)
20
