-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GhYYppNTDOC5DOTuEADV1xabVlXOcJCpLzs9N9Ha8NsuiyGcxqleoOWFySl/28lZ A1cdzZ+mM7LXg93NOrK98Q== 0000890566-99-001297.txt : 20000211 0000890566-99-001297.hdr.sgml : 20000211 ACCESSION NUMBER: 0000890566-99-001297 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990706 ITEM INFORMATION: FILED AS OF DATE: 19990920 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BERRY PLASTICS CORP CENTRAL INDEX KEY: 0000919463 STANDARD INDUSTRIAL CLASSIFICATION: 3089 IRS NUMBER: 351813706 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 033-75706 FILM NUMBER: 99714141 BUSINESS ADDRESS: STREET 1: 101 OAKLEY ST STREET 2: P O BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47710 BUSINESS PHONE: 8124242904 MAIL ADDRESS: STREET 1: PO BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47706-0959 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported) JULY 6, 1999 Berry Plastics Corporation (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER) Delaware 33-75706 35-1813706 (STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.) 101 Oakley Street Evansville, Indiana 47710 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) Registrant's telephone number, including area code (812)424-2904 (FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT) AMENDMENT NO. 1 The undersigned registrant hereby amends the following items, financial statements, exhibits or other portions of its Current Report on Form 8-K, Date of Report July 6, 1999, and filed July 21, 1999, as set forth in the pages attached hereto: ITEM 7 (A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED Audited Consolidated Financial Statements of CPI Holding, Inc. as of November 30, 1998 and 1997 and for the years ended November 30, 1998 and 1997 and for the period January 26, 1996 to November 30, 1996: Independent Auditors' Report of Deloitte & Touche LLP Consolidated Balance Sheets Consolidated Statements of Income Consolidated Statements of Manditorily Redeemable Preferred Stock and Shareholders' Equity Consolidated Statements Cash Flows Notes to Consolidated Financial Statements Unaudited Consolidated Financial Statements of CPI Holding, Inc. as of July 6, 1999 and for the period from November 1, 1998 to July 6, 1999: Consolidated Balance Sheet Consolidated Statement of Operations Consolidated Statement of Cash Flows Note to Consolidated Financial Statements ITEM 7 (B) PRO FORMA FINANCIAL INFORMATION Pro Forma Unaudited Condensed Consolidated Financial Statements of BPC Holding Corporation: Pro Forma Unaudited Condensed Consolidated Balance Sheet as of July 3, 1999 Notes to Pro Forma Unaudited Condensed Consolidated Balance Sheet as of July 3, 1999 ProForma Unaudited Condensed Consolidated Statement of Operations for the fiscal year ended January 2, 1999 Notes to Pro Forma Unaudited Condensed Consolidated Statement of Operations for the fiscal year ended January 2, 1999 ProForma Unaudited Condensed Consolidated Statement of Operations for the six months ended July 3, 1999 Notes to Pro Forma Unaudited Condensed Consolidated Statement of Operations for the six months ended July 3, 1999 Unaudited Pro Forma Financial Information of Berry Plastics Corporation INDEPENDENT AUDITORS' REPORT Board of Directors and Shareholders CPI Holding, Inc. and Subsidiary We have audited the accompanying consolidated balance sheets of CPI Holding, Inc. and Subsidiary as of November 30, 1998 and 1997, and the related consolidated statements of income, mandatorily redeemable preferred stock and shareholders' equity, and cash flows for the years ended November 30, 1998 and 1997 and for the period January 26, 1996 (Date of Acquisition) to November 30, 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of CPI Holding, Inc. and Subsidiary as of November 30, 1998 and 1997, and the results of their operations and their cash flows for the years ended November 30, 1998 and 1997 and for the period January 26, 1996 (Date of Acquisition) to November 30, 1996 in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP Cleveland, Ohio June 11, 1999 CPI HOLDING, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS NOVEMBER 30, 1998 AND 1997
ASSETS (NOTE 4) 1998 1997 ----------- ----------- CURRENT ASSETS: Cash and cash equivalents .................................. $ 101,748 $ 18,624 Accounts receivable, less allowances of $163,000 and $72,000 5,397,359 5,260,109 Inventories ................................................ 7,553,127 7,878,158 Prepaid expenses ........................................... 579,064 455,492 Prepaid income taxes ....................................... 428,019 50,600 Deferred income taxes (Note 7) ............................. 305,000 215,000 ----------- ----------- Total current assets .................................... 14,364,317 13,877,983 ----------- ----------- PROPERTY AND EQUIPMENT: Land ....................................................... 295,000 295,000 Building and improvements .................................. 3,597,818 3,526,034 Machinery and equipment .................................... 24,587,601 22,222,100 Molds ...................................................... 12,486,433 10,720,280 ----------- ----------- Total ................................................... 40,963,852 36,763,414 Less accumulated depreciation and amortization ............. 9,271,295 5,670,397 ----------- ----------- Property and equipment, net ................................ 31,692,557 31,093,017 ----------- ----------- GOODWILL, less accumulated amortization of $1,078,511 in 1998 and $734,756 in 1997 ........................................... 14,147,546 14,491,301 ----------- ----------- OTHER ASSETS (Note 3) ........................................... 1,004,109 1,267,964 ----------- ----------- TOTAL ........................................................... $61,208,529 $60,730,265 =========== ===========
The accompanying notes to consolidated financial statements are an integral part of these financial statements. CPI HOLDING, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (CONTINUED) NOVEMBER 30, 1998 AND 1997
LIABILITIES AND SHAREHOLDERS' EQUITY 1998 1997 ------------ ------------ CURRENT LIABILITIES: Current portion of long-term debt (Note 4) ........................ $ 4,060,780 $ 3,519,064 Current portion of long service executive nonqualified pension (Note 5) ................................................ 420,310 380,000 Accounts payable .................................................. 2,595,014 2,922,093 Accrued liabilities ............................................... 547,524 881,507 ------------ ------------ Total current liabilities ...................................... 7,623,628 7,702,664 LONG-TERM DEBT, less current portion (Note 4) .......................... 28,388,825 28,132,857 LONG SERVICE EXECUTIVE NONQUALIFIED PENSION, less current portion (Note 5) ..................................................... 544,424 968,000 DEFERRED INCOME TAXES (Note 7) ......................................... 5,182,000 4,611,000 ------------ ------------ Total liabilities .............................................. 41,738,877 41,414,521 ------------ ------------ MANDATORILY REDEEMABLE PREFERRED STOCK (Note 9) ........................ 18,761,668 17,171,325 ------------ ------------ SHAREHOLDERS' EQUITY (Notes 4 and 10): Class A (voting), $.01 par value, authorized 500,000 shares, 89,281.5 in 1998 and 90,114.8 in 1997 issued and outstanding . 893 901 Class B (non-voting), $.01 par value, authorized 300,000 shares, 124,760 issued and ........................................... 1,247 1,247 Class C (non-voting), $.01 par value, authorized 200,000 shares, 90,791.6 issued and outstanding .............................. 908 908 Additional paid-in capital ..................................... 883,848 2,392,768 ESOP receivable (Note 8) ....................................... (113,912) (186,405) Stock subscription receivable .................................. (65,000) (65,000) ------------ ------------ Total shareholders' equity ................................... 707,984 2,144,419 ------------ ------------ TOTAL .................................................................. $ 61,208,529 $ 60,730,265 ============ ============
The accompanying notes to consolidated financial statements are an integral part of these financial statements. CPI HOLDING, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED NOVEMBER 30,1998 AND 1997 AND FOR THE PERIOD JANUARY 26, 1996 (DATE OF ACQUISITION) TO NOVEMBER 30, 1996
1998 1997 1996 ------------ ------------ ------------ (10 MONTHS) NET SALES ....................................... $ 53,970,517 $ 54,387,787 $ 45,416,838 COST OF SALES ................................... 43,066,403 42,421,263 34,275,302 ------------ ------------ ------------ GROSS PROFIT .................................... 10,904,114 11,966,524 11,141,536 ------------ ------------ ------------ OPERATING EXPENSES: Selling ..................................... 3,087,033 3,113,293 2,790,338 General and administrative (Note 11) ........ 3,176,276 2,949,312 2,164,232 ESOP contribution (Note 8) .................. 26,720 30,999 209,780 ------------ ------------ ------------ Total operating expenses ............. 6,290,029 6,093,604 5,164,350 ------------ ------------ ------------ INCOME FROM OPERATIONS .......................... 4,614,085 5,872,920 5,977,186 OTHER INCOME (EXPENSE): Interest expense ............................ (3,383,736) (3,531,327) (3,188,345) Miscellaneous, net .......................... 5,602 (8,225) 1,500 ------------ ------------ ------------ INCOME BEFORE INCOME TAXES ...................... 1,235,951 2,333,368 2,790,341 INCOME TAXES (Note 7) ........................... 438,700 797,000 1,056,000 ------------ ------------ ------------ NET INCOME ...................................... $ 797,251 $ 1,536,368 $ 1,734,341 ============ ============ ============
The accompanying notes to consolidated financial statements are an integral part of these financial statements. CPI HOLDING, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF MANDATORILY REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY FOR THE YEAR ENDED NOVEMBER 30, 1998
SHAREHOLDERS' EQUITY MANDATORILY REDEEMABLE ------------------------------ PREFERRED STOCK COMMON STOCK ------------------------------ ------------------------------ SHARES AMOUNT SHARES AMOUNT ------------ ------------ ------------ ------------ BALANCE - DECEMBER 1, 1997 ................... 141,134 $ 17,171,325 305,666 $ 3,056 REDEMPTION OF STOCK: Common stock ........................... (833) (8) Preferred stock ........................ (167) (20,347) NET INCOME ................................... TAX BENEFIT OF DIVIDENDS PAID TO ESOP FOR UNALLOCATED SHARES ..................... REPAYMENT OF ESOP RECEIVABLE ............................. DIVIDENDS: Paid ($8.75 per Class A Preferred Shares outstanding) ......................... (700,000) Increase in accumulated but not declared dividends on mandatorily redeemable preferred stock ...................... 2,310,690 ------------ ------------ ------------ ------------ BALANCE, NOVEMBER 30, 1998 ................... 140,967 $ 18,761,668 304,833 $ 3,048 ============ ============ ============ ============
SHAREHOLDERS' EQUITY ---------------------------------------------------------------------------------- ADDITIONAL STOCK TOTAL PAID-IN RETAINED ESOP SUBSCRIPTION SHAREHOLDERS' CAPITAL EARNINGS RECEIVABLE RECEIVABLE EQUITY ------------ ------------ ------------ ------------ ------------ BALANCE - DECEMBER 1, 1997 ................... $ 2,392,768 $ (186,405) $ (65,000) $ 2,144,419 REDEMPTION OF STOCK: Common stock ........................... (22,145) (22,153) Preferred stock ........................ NET INCOME ................................... $ 797,251 797,251 TAX BENEFIT OF DIVIDENDS PAID TO ESOP FOR UNALLOCATED SHARES ..................... 26,664 26,664 REPAYMENT OF ESOP RECEIVABLE ............................. 72,493 72,493 DIVIDENDS: Paid ($8.75 per Class A Preferred Shares outstanding) Increase in accumulated but not declared dividends on mandatorily redeemable preferred stock ...................... (1,486,775) (823,915) (2,310,690) ------------ ------------ ------------ ------------ ------------ BALANCE, NOVEMBER 30, 1998 ................... $ 883,848 -- $ (113,912) $ (65,000) $ 707,984 ============ ============ ============ ============ ============
The accompanying notes to consolidated financial statements are an integral part of these financial statements. CPI HOLDING, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF MANDATORILY REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY FOR THE YEAR ENDED NOVEMBER 30, 1997
SHAREHOLDERS' EQUITY MANDATORILY REDEEMABLE ------------------------------ PREFERRED STOCK COMMON STOCK ------------------------------ ------------------------------ SHARES AMOUNT SHARES AMOUNT ------------ ------------ ------------ ------------ BALANCE - DECEMBER 1, 1996 ..................... 140,867 $ 15,872,343 304,333 $ 3,043 ISSUANCE OF STOCK: Common stock ............................. 1,333 13 Preferred stock .......................... 267 26,668 NET INCOME ..................................... TAX BENEFIT OF DIVIDENDS PAID TO ESOP FOR UNALLOCATED SHARES ....................... REPAYMENT OF ESOP RECEIVABLE ............................... DIVIDENDS: Paid ($11.97 per Class A Preferred Shares outstanding) ........................... (943,559) Increase in accumulated but not .......... dividends on mandatorily redeemable preferred stock ........................ 2,215,873 ------------ ------------ ------------ ------------ BALANCE, NOVEMBER 30, 1997 ..................... 141,134 $ 17,171,325 305,666 $ 3,056 ============ ============ ============ ============
SHAREHOLDERS' EQUITY ------------------------------------------------------------------------------- ADDITIONAL STOCK TOTAL PAID-IN RETAINED ESOP SUBSCRIPTION SHAREHOLDERS' CAPITAL EARNINGS RECEIVABLE RECEIVABLE EQUITY ------------ ------------ ------------ ------------ ------------ BALANCE - DECEMBER 1, 1996 ..................... $ 2,988,955 $ (360,000) $ (65,000) $ 2,566,998 ISSUANCE OF STOCK: Common stock ............................. 13,318 13,331 Preferred stock .......................... NET INCOME ..................................... $ 1,536,368 $ 1,536,368 TAX BENEFIT OF DIVIDENDS PAID TO ESOP FOR UNALLOCATED SHARES ....................... 70,000 70,000 REPAYMENT OF ESOP RECEIVABLE ............................... $ 173,595 173,595 DIVIDENDS: Paid ($11.97 per Class A Preferred Shares oustanding) ............................ Increase in accumulated but not dividends on mandatorily redeemable preferred stock ........................ (609,505) (1,606,368) (2,215,873) ------------ ------------ ------------ ------------ ------------ BALANCE, NOVEMBER 30, 1997 ..................... $ 2,392,768 -- $ (186,405) $ (65,000) $ 2,144,419 ============ ============ ============ ============ ============
The accompanying notes to consolidated financial statements are an integral part of these financial statements. CPI HOLDING, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF MANDATORILY REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY FOR THE YEAR ENDED NOVEMBER 30, 1996
SHAREHOLDERS' EQUITY MANDATORILY REDEEMABLE ---------------------------------------------- PREFERRED STOCK COMMON STOCK ADDITIONAL ----------------------------- ----------------------------- PAID-IN SHARES AMOUNT SHARES AMOUNT CAPITAL ------------ ------------ ------------ ------------ ------------ ISSUANCE OF STOCK: Class A Preferred ............... 80,000 $ 8,000,000 Class B Preferred ............... 60,000 6,000,000 Class A Common .................. 88,782 $ 888 $ 886,928 Class B Common .................. 124,760 1,248 1,246,352 Class C Common .................. 86,458 864 863,720 ESOP RECEIVABLE ACQUIRED IN ACQUISITION FOR GUARANTEE OF FUTURE DEBT PAYMENTS ..................... ISSUANCE OF STOCK UNDER EXECUTIVE STOCK AGREEMENTS: Class C Common .................. 4,333 43 43,289 Class B Preferred ............... 867 86,668 NET INCOME ............................ REDUCTION OF ESOP RECEIVABLE .......... DIVIDENDS: Increase in accumulated but not declared dividends on redeemable preferred stock ................ 1,785,675 (51,334) ------------ ------------ ------------ ------------ ------------ BALANCE, NOVEMBER 30, 1996 ............ 140,867 $ 15,872,343 304,833 $ 3,043 $ 2,988,955 ============ ============ ============ ============ ============
SHAREHOLDERS' EQUITY -------------------------------------------------------------- CAPITAL STOCK TOTAL RETAINED ESOP SUBSCRIPTION SHAREHOLDERS' EARNINGS RECEIVABLE RECEIVABLE EQUITY ------------ ------------ ------------ -------------- ISSUANCE OF STOCK: Class A Preferred ............... Class B Preferred ............... Class A Common .................. $ 887,816 Class B Common .................. 1,247,600 Class C Common .................. 864,584 ESOP RECEIVABLE ACQUIRED IN ACQUISITION FOR GUARANTEE OF FUTURE DEBT PAYMENTS ..................... $ (540,000) (540,000) ISSUANCE OF STOCK UNDER EXECUTIVE STOCK AGREEMENTS: Class C Common .................. $ (21,666) 21,666 Class B Preferred ............... (43,334) (43,334) NET INCOME ............................ $ 1,734,341 1,734,341 REDUCTION OF ESOP RECEIVABLE .......... 180,000 180,000 DIVIDENDS: Increase in accumulated but not declared dividends on redeemable preferred stock ................ (1,734,341) (1,785,675) ------------ ------------ ------------ ------------ BALANCE, NOVEMBER 30, 1996 ............ -- $ (360,000) $ (65,000) $ 2,566,998 ============ ============ ============ ============
The accompanying notes to consolidated financial statements are an integral part of these financial statements. CPI HOLDING, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS CASH FLOWS FOR THE YEARS ENDED NOVEMBER 30, 1998 AND 1997 AND FOR THE PERIOD JANUARY 26, 1996 (DATE OF ACQUISITION) TO NOVEMBER 30, 1996
1998 1997 1996 ------------ ------------ ------------ (10 MONTHS) CASH FLOWS FROM OPERATING ACTIVITIES: Net income .......................................................... $ 797,251 $ 1,536,368 $ 1,734,341 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization .................................... 4,167,042 3,849,775 2,954,524 (Gain) loss on disposals of property and equipment ............... (5,602) 8,225 (1,500) Deferred income taxes ............................................ 481,000 20,000 303,000 Tax benefit of dividends paid to ESOP ............................ 26,664 70,000 Change in operating assets and liabilities: Accounts receivable .......................................... (137,250) 113,169 346,751 Inventories .................................................. 325,031 344,427 (1,908,856) Prepaid expenses, prepaid income taxes, and deposits ......... (444,735) 145,576 (388,988) Accounts payable ............................................. (327,079) (1,187,703) (501,026) Accrued liabilities .......................................... (333,983) (241,057) 497,245 Income taxes payable ......................................... -- (203,900) 283,300 ------------ ------------ ------------ Net cash provided by operating activities ........................... 4,548,339 4,454,880 3,318,791 ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of stock of Cardinal Packaging, Inc. along with land and buildings from a related partnership, including acquisition costs and net of cash received of $28,946 ......................... (39,363,708) Purchase of property and equipment .................................. (4,207,586) (3,160,719) (2,882,380) Proceeds from disposal of property and equipment .................... 7,500 2,500 1,500 Investment in patents ............................................... (9,540) ------------ ------------ ------------ Net cash used in investing activities ............................... (4,209,626) (3,158,219) (42,244,588) ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Preferred dividends paid ............................................ (700,000) (943,559) Repayment of ESOP receivable ........................................ 72,493 173,595 Proceeds from issuance of (payments for redemption of): Common Stock ..................................................... (22,153) 13,331 3,021,666 Mandatorily redeemable preferred stock .............................. (20,347) 26,668 6,043,334 Proceeds from long-term debt ........................................ 4,190,822 2,508,745 30,993,349 Payments on long-term debt, and long service executive nonqualified pension .............................................. (3,776,404) (3,112,774) (1,076,595) ------------ ------------ ------------ Net cash (used in) provided by financing activities ................. (255,589) (1,333,994) 38,981,754 ------------ ------------ ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ...................... 83,124 (37,333) 55,957 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR .............................. 18,624 55,957 -- ------------ ------------ ------------ CASH AND CASH EQUIVALENTS, END OF YEAR .................................... $ 101,748 $ 18,624 $ 55,957 ============ ============ ============ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year for: Income taxes ........................................................ $ 335,119 $ 925,942 $ 415,525 ============ ============ ============ Interest ............................................................ $ 3,776,313 $ 3,384,339 $ 2,240,510 ============ ============ ============ SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES: The Company received stock subscriptions of $65,000 in 1996. In conjunction with the acquisition in 1996, the Company recorded liabilities to the former shareholders totaling $1,960,000 and issued preferred stock valued at $8,000,000 in exchange for previously issued common shares of Cardinal.
The accompanying notes to consolidated financial statements are an integral part of these financial statements. CPI HOLDING, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED NOVEMBER 30, 1998 AND 1997 AND FOR THE PERIOD JANUARY 26, 1996 (DATE OF ACQUISITION) TO NOVEMBER 30, 1996 - - -------------------------------------------------------------------------------- 1. NATURE OF OPERATIONS AND ORGANIZATION CPI Holding, Inc. ("CPI" or the "Company") was organized under the laws of the State of Delaware for the purpose of acquiring an injection molding manufacturer. On January 26, 1996, CPI acquired 100 percent of the common stock of Cardinal Packaging, Inc. ("Cardinal"). The Company, through its wholly-owned subsidiary, Cardinal, is a manufacturer of rigid thin-walled polyethylene and polypropylene containers and sells its products to customers located throughout the United States and Canada. The majority of the Company's products are used in the frozen dessert and refrigerated product industries in the form of premium round containers. In addition, the Company provides containers for selected industrial customers and seasonal retailers. The Company maintains ongoing credit evaluations of its customers and generally does not require collateral. The Company provides reserves for potential credit losses and such losses historically have not exceeded management's estimates. The Company is headquartered in Streetsboro, Ohio. Additional manufacturing facilities are located in Minneapolis, Minnesota and Ontario, California. CPI acquired, along with land and buildings previously owned by a related partnership, 70 percent of the common stock of Cardinal for $39,392,654, including acquisition costs. The remaining 30 percent of the common stock of Cardinal was acquired from the Cardinal Packaging, Inc. Employee Stock Ownership Plan ("ESOP") in exchange for 80,000 shares of CPI Class A redeemable preferred stock valued at $8,000,000. In addition, and in conjunction with the acquisition, the Company entered into an agreement to pay the sellers $2,460,000 (which includes imputed interest of $500,000) in monthly payments through January 2001 (see Note 5). The total purchase price, including acquisition costs, has been allocated to the assets acquired and liabilities assumed based on their estimated fair values, except for the portion related to the ESOP's ownership which is accounted for at historical costs, using the purchase method of accounting. In addition, goodwill was reduced by $745,000 because of the deferred tax asset recorded for the future tax benefits of the long service executive nonqualified pension payments (See Note 7). Accordingly, the amounts recorded for this acquisition were as follows: Current Assets, including $28,946 of cash ............... $12,435,461 Property ................................................ 30,557,656 Other assets ............................................ 1,743,858 ----------- Total assets acquired ............................. 44,736,975 Liabilities assumed ..................................... 11,355,378 ----------- Net assets acquired ..................................... 33,381,597 Goodwill ................................................ 15,226,057 ----------- Total purchase price, including acquisition costs ....... $48,607,654 =========== As a result of the acquisition in 1996, the inventory on January 26, 1996 was increased by $296,712 based on the fair market value of the acquired inventory at the date of acquisition. Cost of sales for the period January 26, 1996 (date of acquisition) to November 30, 1996 includes $296,712 related to this adjustment. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FINANCIAL STATEMENT PRESENTATION--The consolidated financial statements include the accounts of CPI and its wholly-owned subsidiary. All significant intercompany balances and transactions are eliminated in consolidation. USE OF ESTIMATES--The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the financial statement date and the reported amounts of revenues and expenses for the reporting period. Actual amounts could differ from those estimates. REVENUE RECOGNITION--Sales and cost of sales are recognized upon shipment of product. CASH AND CASH EQUIVALENTS--The Company considers all highly liquid investments with original maturities of three months or less, when purchased, to be cash equivalents. INVENTORIES--Inventories are valued at the lower of cost, using the first-in, first-out basis, or market. Inventories consist of the following at November 30: 1998 1997 ----------- ----------- Raw materials................... $ 2,433,849 $ 1,700,765 Finished Good................... 5,119,278 6,177,393 ----------- ----------- Total........................... $ 7,553,127 $ 7,878,158 =========== =========== PROPERTY AND EQUIPMENT--Property and equipment is stated at cost. Additions, renewals and betterments are capitalized; maintenance and repairs, which do not extend the useful life of the asset, are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range from ten to 40 years for buildings, related building improvements and leasehold improvements, 12 to 15 years for manufacturing machinery and equipment, seven years for molds, five years for office furniture and fixtures, and three years for vehicles. Equipment under capitalized leases is amortized over the terms of the leases, which do not exceed the estimated useful life of the leased equipment. GOODWILL AND INTANGIBLE ASSETS--The Company's intangible assets consist of goodwill, deferred financing costs, and patent costs. Amortization is recorded over the estimated economic lives. Goodwill is amortized over 40 years. Deferred financing costs are amortized over the terms of the related loans with the amortization included in interest expense. Patent costs are amortized over 17 years, beginning when the patent approval is obtained. The Company evaluates the unamortized cost of these intangible assets to determine if the carrying amount exceeds the recoverable amount and to record an impairment loss, if necessary. This determination is based on an evaluation of such factors as the occurrence of a significant event, a significant change in the environment in which the business operates or, primarily for goodwill, the expected undiscounted future net cash flows. INCOME TAXES--Deferred income taxes are recognized for the expected future tax consequences of events that have been recognized in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of various assets and liabilities using enacted rates in effect for the year in which the differences are expected to reverse. NEW ACCOUNTING PRONOUNCEMENTS--In 1998, Cardinal adopted Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income," SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," and SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits". SFAS No. 130 established standards for reporting and displaying comprehensive income and its components in a full set of general-purpose financial statements. SFAS No. 131 requires that a public business enterprise report financial and descriptive information about its reportable operating segments such as a measure of segment profit or loss, certain specific revenue and expense items, and segment assets. SFAS No. 132 standardized the disclosure requirements for pensions and other postretirement benefits. The adoption of these statements did not have a material impact on the Company's financial statements. In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. SFAS No. 133 is effective for fiscal quarters of fiscal years beginning after June 15, 1999. The Company has not completed its evaluation of this statement but does not anticipate a material impact on the financial statements from the adoption of this accounting standard. RECLASSIFICATIONS--Certain reclassifications were made to the 1996 and 1997 financial statements to conform to the presentation used in the 1998 financial statements. 3. OTHER ASSETS Other assets consist of the following at November 30:
1998 1997 ---------- ---------- Deferred financing costs, less accumulated amortization of $607,139 in 1998 and $392,855 in 1997 ............... $ 892,861 $1,107,145 Deposits ................................................. 65,106 115,062 Patents, less accumulated amortization of $18,566 in 1998 and $15,711 in 1997 ................................. 46,142 39,457 Miscellaneous ............................................ 6,300 ---------- ---------- Total ......................................... $1,004,109 $1,267,964 ========== ==========
4. LONG-TERM DEBT Long-term debt consists of the following as of November 30:
1998 1997 ----------- ----------- Note payable to financial institution with quarterly principal payments at scheduled amounts, plus interest at a variable rate (7.8125 percent as of November 30,1998), due March 1, 2001 ..................................... $10,500,000 $13,500,000 Note payable to financial institution with quarterly principal payments at scheduled amounts beginning in 2001, plus interest at a variable rate (8.3125 percent as of November 30,1998), due March 1, 2001 ............... 10,000,000 10,000,000 Revolving credit facility payable to financial institution with interest at a variable rate (7.8125 percent as of November 30,1998), due March 1, 2003 ............................................................ 7,002,522 5,615,116 Capital expansion note payable to financial institution with quarterly interest payments at a variable rate (8.3125 percent as of November 30, 1998), fifteen equal quarterly principal payments, plus interest, beginning September 1, 1999, due March 2003 .............................. 4,681,646 1,886,980 ESOP loan to bank with semi-annual principal payments of $90,000, plus monthly interest (6.5875 percent as of November 30, 1998) at 85 percent of the bank's prime rate, through January 2000;collateralized by the common stock of the Company ..................................................... 113,912 186,405 Note payable to financing company with monthly principal and interest payments of $3,690, through October 1999; interest at 6.755 percent a year, collateralized by specific equipment ............................... 39,252 79,399 Other notes payable to banks paid off in 1998 ........................... 3,481 Capital lease obligations for equipment, payable to various banks and leasing companies in aggregate monthly principal and interest payments of $20,583 through July 2000; interest at 6.75 percent to 10.85 percent a year; collateralized by equipment with an aggregate net book value of $810,344 and $1,454,135 as of November 30, 1998 and November 30, 1997, respectively ............................................................. 112,273 380,540 ----------- ----------- Total .................................................................... 32,449,605 31,651,921 Less current portion ..................................................... 4,060,780 3,519,064 ----------- ----------- Amount due after one year ................................................ $28,388,825 $28,132,857 =========== ===========
The notes payable, revolving credit facility, and capital expansion note are collateralized by substantially all of the assets of the Company. The credit agreement includes financial covenants with respect to capital expenditure limits; rent payments under operating leases; earnings before depreciation, amortization, interest and income taxes; and fixed charge and interest coverage ratios. As of November 30, 1998, the Company has violated certain of these covenants related to minimum EBITDA, as defined, fixed charges coverage ratio, interest coverage ratio, and maximum capital expenditures, for which the lender has waived the covenant violations. At November 30, 1998, required annual principal payments on long-term debt are: YEAR ENDING NOVEMBER 30, 1999........................................ $4,060,780 2000........................................ 5,765,206 2001........................................ 6,248,439 2002........................................ 6,248,439 2003........................................ 10,126,741 ----------- Total....................................... $32,449,605 =========== Future minimum lease payments under capital leases, included above, as of November 30, 1998 are as follows: YEAR ENDING NOVEMBER 30, 1999........................................ $109,337 2000........................................ 7,080 -------- Total minimum lease payments................ 116,417 Less amount representing interest........... 4,144 -------- Present value of capital lease obligations included with long-term debt at November 30, 1998................................. $112,273 ======== 5. LONG SERVICE EXECUTIVE NONQUALIFIED PENSION AND CONSULTING AGREEMENTS Under the terms of the purchase agreement for the common stock of Cardinal, the Company agreed to make payments to the previous shareholders of $41,000 a month through January 2001 for long service executive nonqualified pension payments. These future payments have been recorded as a liability at their net present value. In addition, the Company paid $20,000 a year to the previous shareholders under a consulting agreement from February 1996 through January 1998. Consulting expense was $3,333 for 1998, $20,000 for 1997, and $16,660 for the period January 26, 1996 to November 30, 1996. At November 30, 1998, future payments under the long service executive nonqualified pension agreement are as follows: YEAR ENDING NOVEMBER 30, 1999........................................ $492,000 2000........................................ 492,000 2001........................................ 82,000 ---------- Total Payments.............................. 1,066,000 Less amount representing interest (at 9.25 percent).................................. 101,266 ---------- Present value of long service executive nonqualified pension........................ 964,734 Current portion............................. 420,310 ---------- Noncurrent portion.......................... $544,424 ========== 6. OPERATING LEASES The Company leases specific equipment, vehicles, and its Minneapolis, Minnesota and Ontario, California office and plant facilities under operating leases from unrelated parties. These leases expire at various dates through November 2003. Total rent expense, including month-to-month rentals, was $1,588,000 for 1998, $1,538,000 for 1997. Future minimum lease payments under noncancellable operating leases as of November 30, 1998 are: YEAR ENDING NOVEMBER 30, 1999........................................ $1,479,200 2000........................................ 1,218,900 2001........................................ 999,300 2002........................................ 945,300 2003........................................ 855,600 ---------- Total....................................... $5,498,300 ========== 7. INCOME TAXES The provision (benefit) for income taxes consists of:
1998 1997 1996 ----------- ----------- ----------- (10 MONTHS) Federal: Current .......................................................... $ (122,300) $ 649,000 $ 618,000 Deferred ......................................................... 267,000 31,000 245,000 State and local: Current .......................................................... 80,000 128,000 135,000 Deferred ......................................................... 214,000 (11,000) 58,000 ----------- ----------- ----------- Total ................................................................. $ 438,700 $ 797,000 $ 1,056,000 =========== =========== ===========
The consolidated tax provision differs from the tax provision computed at the statutory United States tax rate of approximately 34 percent for the following reasons:
1998 1997 1996 ----------- ----------- ----------- Tax provision at statutory federal rate ............................... $ 420,000 $ 785,000 $ 949,000 Amortization of goodwill .............................................. 117,000 136,000 114,000 Dividends paid to Employee Stock Ownership Plan on allocated shares .............................................. (163,000) (189,000) State and local income taxes .......................................... 294,000 117,000 193,000 Other ................................................................. (229,300) (52,000) (200,000) ----------- ----------- ----------- Total ...................................................... $ 438,700 $ 797,000 $ 1,056,000 =========== =========== ===========
The tax benefit of the deductible portion of the Class A preferred dividends paid on the unallocated shares held by the ESOP that were utilized by the ESOP to make debt payments was charged directly to retained earnings. The approximate tax effect of each type of temporary difference that gave rise to the Company's deferred tax assets and liabilities as of November 30, is as follows:
1998 1997 ----------- ----------- Current deferred income tax assets (liabilities): Inventories ............................................ $ 73,000 $ 53,000 (Prepaid) accrued state income taxes ................... 6,000 (13,000) Accrued liabilities .................................... 4,000 3,000 Long service executive nonqualified pension - current .. 160,000 145,000 Allowance for doubtful accounts ........................ 62,000 27,000 ----------- ----------- 305,000 215,000 ----------- ----------- Noncurrent deferred income tax assets (liabilities): Basis of property ...................................... (5,878,000) (5,509,000) Long service executive nonqualified pension - noncurrent 206,000 367,000 Net operating loss carryforward ........................ 102,000 Alternative minimum tax credit carryforwards ........... 388,000 531,000 ----------- ----------- (5,182,000) (4,611,000) ----------- ----------- Net deferred income tax liability ........................... $(4,877,000) $(4,396,000) =========== ===========
8. EMPLOYEE STOCK OWNERSHIP PLAN In 1988, Cardinal established an employee stock ownership plan. On December 14, 1989, the ESOP used $1,800,000 of proceeds from a bank loan to purchase 30 percent of Cardinal's common stock. In conjunction with the acquisition of Cardinal by CPI in which the ESOP exchanged its 30 percent investment in Cardinal for a 22 percent investment in CPI, the Company assumed the remaining bank obligation of $720,000 at January 26, 1996. As of November 30, 1998, $113,912 remains outstanding on this loan. As a result of the Company assuming the bank obligation, the Company also recorded a loan receivable from the ESOP, which is reported as a reduction of shareholders' equity. The Company is obligated to make contributions to the ESOP that are used by the ESOP to pay the loan principal and interest to the bank. Shares of stock acquired by the ESOP are allocated to each eligible employee in amounts based on the employee's compensation. Company contributions charged to expense were $26,720 in 1998, $30,999 in 1997 and $209,780 for the period January 26, 1996 to November 30, 1996. The Company paid Class A preferred dividends of $700,000 in 1998 and $943,559 in 1997 to the ESOP. The ESOP used a portion of the dividends to make the required principal payments. 9. MANDATORILY REDEEMABLE PREFERRED STOCK MANDATORILY REDEEMABLE PREFERRED STOCK--The Company is authorized to issue 100,000 nonvoting shares of Class A redeemable preferred stock and 100,000 non-voting shares of Class B redeemable preferred stock, each with a par value of $.01 per share. There are 80,000 shares of Class A redeemable preferred stock outstanding as of November 30, 1998 and 1997. There are 60,966.69 shares of Class B redeemable preferred stock outstanding as of November 30, 1998 and 61,133.36 shares outstanding as of November 30, 1997, including 866.68 shares issued under Executive Stock Agreements described in Note 10. Accumulating dividends accrue daily at 8.75 percent of the liquidation value ($100 per share) plus any accumulated dividends on the Class A redeemable preferred stock. Accumulating dividends accrue at 10 percent of the liquidation value ($100 per share) plus any accumulated dividends on the Class B redeemable preferred stock. Unpaid accumulating dividends are deemed to be accumulated dividends for purposes of calculating the accumulating and nonaccumulating dividends. Nonaccumulating dividends accrue daily at 10 percent of the liquidation value plus any accumulated dividends on the Class A redeemable preferred stock only. Unpaid nonaccumulating dividends are not deemed to be accumulated dividends for purposes of calculating the accumulating and nonaccumulating dividends. Accumulating dividends were $1,483,077 for the year ended November 30, 1998 and $1,385,329 for the year ended November 30, 1997. The nonaccumulating dividends were $827,613 for the year ended November 30, 1998 and $830,544 for the year ended November 30, 1997. These amounts have been recorded as an increase in the redeemable preferred stock and as a reduction of retained earnings and of additional paid-in capital in the accompanying consolidated statements of mandatorily redeemable preferred stock and shareholders' equity. As of November 30, 1998, the unpaid accumulating dividends were $2,331,161 and the unpaid nonaccumulating dividends were $2,331,864. On June 30, 2003, the Company shall redeem all outstanding shares of the Class A and Class B redeemable preferred stock for the aggregate liquidation value plus all unpaid dividends. The aggregate liquidation value and unpaid dividends of the Class A and Class B redeemable preferred stock is $18,761,668 as of November 30, 1998 and $17,171,325 as of November 30, 1997. The Class A redeemable preferred stock is convertible at the shareholders' option into Class A common stock at any time based on the liquidation value of the shares to be converted at the then current conversion price. 10. COMMON STOCK The authorized shares of stock and the number of shares outstanding as of November 30, 1998 and 1997 are as follows: COMMON STOCK--The Company has three classes of common stock of which Class A is voting and Class B and C are non-voting. Holders of Class B common stock are entitled to convert such shares into the same number of shares of Class A or Class C common stock at any time. Holders of Class C common stock are entitled to convert such shares into the same number of shares of Class A common stock upon the occurrence of a Conversion Event as defined in the Company's Certificate of Amendment to Certificate of Incorporation. Class C common stock includes 4,333.2 shares issued under Executive Stock Agreements described below, as of November 30, 1998 and 1997. EXECUTIVE STOCK AGREEMENTS--The Company has entered into agreements with certain members of its management under which shares of Class B redeemable preferred stock and Class C common stock have been issued. The Company has notes receivable aggregating $65,000 from manager shareholders for the purchase of one-half of their shares at November 30, 1998 and 1997. These notes bear interest at 8.25 percent a year and are reported as stock subscriptions receivable as a reduction of shareholders' equity. One-half of the shares of common stock and one-half of the shares of redeemable preferred stock vest immediately and the remaining shares vest upon the payment in full of the receivables plus any accrued interest. In the event a shareholder manager ceases to be employed by the Company, the Company and certain shareholders have the right to repurchase all or a portion of these shares from the individual at the fair value of the vested shares and the lower of the fair value of shares or the original cost of the unvested shares held as of the date of termination. 11. RELATED PARTY TRANSACTIONS The following amounts were paid to shareholders of the Company: 1998 1997 1996 ---------- ---------- ---------- Management fees ....... $ 200,000 $ 200,000 $ 200,000 Transaction costs ..... 1,285,000 ---------- ---------- ---------- Total ............ $ 200,000 $ 200,000 $1,485,000 ========== ========== ========== The management fees are included in general and administrative expense in the accompanying statements of income. The transaction costs were capitalized as of the acquisition date. * * * * * * CPI Holding, Inc. and Subsidiary Consolidated Balance Sheet July 6, 1999 (In Thousands of Dollars) (UNAUDITED) ASSETS Current assets: Cash and cash equivalents ............................... $ 16 Accounts receivable (less allowance for doubtful accounts of $156) ..................................... 7,025 Inventories: Finished goods ...................................... 5,406 Raw materials and supplies .......................... 2,247 ------- 7,653 Prepaid expenses and other receivables .................. 404 Deferred income taxes ................................... 305 ------- Total current assets ........................................ 15,403 Property and equipment: Land .................................................... 295 Buildings and improvements .............................. 3,499 Machinery, equipment and tooling ........................ 37,473 Automobiles and trucks .................................. 54 Construction in progress ................................ 2,021 ------- 43,342 Less accumulated depreciation ........................... 11,604 ------- 31,738 Intangible assets: Deferred financing and origination fees, net ............ 768 Excess of cost over net assets acquired, net ............ 13,925 ------- 14,693 Other (Deposits, Trademarks, Patents) ....................... 82 ------- Total assets ................................................ $61,916 ======= CPI Holding, Inc. and Subsidiary Consolidated Balance Sheet (continued) July 6, 1999 (In Thousands of Dollars)
(UNAUDITED) LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable ........................................................... $ 4,708 Accrued expenses and other liabilities ..................................... 667 Current portion of long-term debt .......................................... 4,987 -------- Total current liabilities ...................................................... 10,362 Long-term debt, less current portion ........................................... 28,022 Deferred income taxes .......................................................... 5,182 -------- 43,566 Stockholders' equity: Mandatorily Redeemable Preferred Stock ..................................... 19,348 Class A Common Stock (voting); $.01 par value: 500,000 shares authorized; 89,281.5 shares issued and outstanding ...... 1 Class B Common Stock (non-voting); $.01 par value: 300,000 shares authorized; 124,760 shares issued and outstanding ....... 1 Class C Common Stock (non-voting); $.01 par value: 200,000 shares authorized; 90,791.6 shares issued and outstanding ..................... 1 Additional paid-in capital ................................................. 349 Retained earnings .......................................................... (1,171) Less: ESOP receivable ..................................................... (114) Stock subscription receivable ................................... (65) -------- Total stockholders' equity ..................................................... 18,350 -------- Total liabilities and stockholders' equity ..................................... $ 61,916 ========
SEE NOTE TO CONSOLIDATED FINANCIAL STATEMENTS. CPI Holding, Inc. and Subsidiary Consolidated Statement of Operations For the period from December 1, 1998 to July 6, 1999 (In Thousands of Dollars) (UNAUDITED) Net sales ............................................. $ 34,672 Cost of goods sold .................................... 29,394 -------- Gross margin .......................................... 5,278 Operating expenses: Selling ........................................... 1,852 General and administrative ........................ 2,200 Amortization of intangibles ....................... 351 Other ............................................. 84 -------- Operating income ...................................... 791 Interest expense .................................. 1,715 -------- Loss before income taxes .............................. (924) Income tax expense .................................... 202 -------- Net loss .............................................. $ (1,126) ======== SEE NOTE TO CONSOLIDATED FINANCIAL STATEMENTS. CPI Holding, Inc. and Subsidiary Consolidated Statement of Cash Flows For the period from December 1, 1998 to July 6, 1999 (In Thousands of Dollars) UNAUDITED OPERATING ACTIVITIES Net loss ...................................................... $(1,126) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation .......................................... 2,333 Amortization .......................................... 348 Changes in operating assets and liabilities: Accounts receivable, net .......................... (1,628) Inventories ....................................... (100) Prepaid expenses and other receivables ............ 603 Other assets ...................................... 29 Payables and accrued expenses ..................... 2,231 ------- Net cash provided by operating activities ..................... 2,690 INVESTING ACTIVITIES Additions to property and equipment ........................... (2,378) ------- Net cash used for investing activities ........................ (2,378) FINANCING ACTIVITIES Proceeds from long-term borrowings ............................ 2,389 Payments on long-term borrowings .............................. (2,794) Proceeds from Preferred equity ................................ 7 ------- Net cash used for financing activities ........................ (398) ------- Net decrease in cash and cash equivalents ..................... (86) Cash and cash equivalents at beginning of period .............. 102 ------- Cash and cash equivalents at end of period .................... $ 16 ======= SEE NOTE TO CONSOLIDATED FINANCIAL STATEMENTS. CPI Holding, Inc. and Subsidiary Note to Consolidated Financial Statements (In Thousands of Dollars) As of July 6, 1999 and for the period from December 1, 1998 to July 6, 1999 The unaudited consolidated financial statements of CPI Holding, Inc. and Subsidiary as of July 6, 1999 and for the period from December 1, 1998 to July 6, 1999 have been prepared in accordance with generally accepted accounting principles for interim financial information. 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 considered necessary for a fair presentation have been included. Operating results for the period presented are not necessarily indicative of the results that may be expected for the full fiscal year. These statements should be read in conjunction with the audited consolidated financial statements of CPI Holding, Inc. as of November 30, 1998 and 1997 and for the years ended November 30, 1998 and 1997 and for the period January 26, 1996 to November 30, 1996 included in this Form 8-K/A. Comparative consolidated financial statements as of July 6, 1998 and for the period from December 1, 1997 to July 6, 1998 have not been presented as these statements were not available. BPC HOLDING CORPORATION PRO FORMA UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) The following unaudited pro forma condensed consolidated balance sheet and pro forma condensed consolidated statements of operations (collectively, the "Pro Forma Statements") give effect to the purchase of the outstanding common stock of CPI Holding Corporation ("CPI Holding") and Norwich Injection Moulders Limited ("Norwich Moulders") and the purchase of substantially all of the assets of the Knight Engineering Plastics Division of Courtaulds Packaging Inc. ("Knight Plastics") by Berry Plastics Corporation ("Berry"). Berry is a wholly owned subsidiary of BPC Holding Corporation ("Holding"). The pro forma information is based on the historical consolidated financial statements of Holding, the historical financial statements of CPI Holding, Norwich Moulders, and Knight Plastics, giving effect to the acquisitions using the purchase method of accounting and the assumptions and adjustments in the accompanying notes to the pro forma condensed consolidated financial statements. The pro forma condensed balance sheet gives effect to the acquisitions as if they had occurred on July 3, 1999 and the condensed statements of operations give effect to the acquisitions as if it had occurred on December 28, 1998. There are no pro forma condensed balance sheet adjustments as of July 3, 1999 for the acquisitions of Norwich Moulders and Knight Plastics as these adjustments are reflected in Holding's historical balances as of July 3, 1999. There are no pro forma condensed consolidated statement of operations adjustments for the six months ended July 3, 1999 for the acquisitions of Norwich Moulders and Knight Plastics as the operations of these businesses are included in Holding's historical balances from December 28, 1998 through July 3, 1999. The Pro Forma Statements do not purport to represent what Holding's consolidated financial position or results of operations would actually have been if such transactions had in fact occurred on such dates or to project Holding's consolidated financial position or results of operations for any future date or period. The pro forma adjustments are based upon available information and upon assumptions that Holding believes to be reasonable. The Pro Forma Statements and accompanying notes should be read in conjunction with the historical consolidated financial statements and related notes of Holding included within its Annual Report on Form 10-K for the year ended January 2, 1999, with the audited consolidated financial statements and related notes of CPI Holding, Inc. as of November 30, 1998 and 1997 and for the years ended November 30, 1998 and 1997 and for the period January 26, 1996 to November 30, 1996 included in this Form 8-K/A, and with Form 8-K/A filed on September 15, 1998 which provides similar information related to the acquisition of Norwich Moulders. BPC HOLDING CORPORATION PRO FORMA UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET (DOLLARS IN THOUSANDS)
JULY 3, 1999 ------------------------------------------------------------- HOLDING CPI HOLDING PRO FORMA CONSOLIDATED HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA ------------ ------------- ----------- ------------- (UNAUDITED) (UNAUDITED) Current assets Cash and cash equivalents ............................ $ 2,993 $ 16 $ -- $ 3,009 Accounts receivable .................................. 40,842 7,025 -- 47,867 Inventories .......................................... 32,314 7,653 -- 39,967 Other current assets ................................. 2,658 709 -- 3,367 --------- --------- --------- --------- Total current assets ............................ 78,807 15,403 -- 94,210 Assets held in trust ...................................... 252 -- -- 252 Property and equipment, net ............................... 120,271 31,738 (10,695)(a) 141,314 Intangible assets, net .................................... 55,950 14,693 34,336 (b) 104,979 Other assets .............................................. 3,129 82 -- 3,211 --------- --------- --------- --------- Total assets .................................... $ 258,409 $ 61,916 $ 23,641 $ 343,966 ========= ========= ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable ..................................... $ 20,664 $ 4,708 $ -- $ 25,372 Accrued liabilities .................................. 26,075 667 -- 26,742 Current portion of long-term debt .................... 20,297 4,987 (4,987)(c) 20,297 --------- --------- --------- --------- Total current liabilities ....................... 67,036 10,362 (4,987) 72,411 Long-term debt, less current portion: ..................... 300,187 28,022 46,978 (d) 375,187 Other liabilities ......................................... 11,853 5,182 -- 17,035 --------- --------- --------- --------- Total liabilities ............................... 379,076 43,566 41,991 464,633 Stockholders' equity (deficit): Total stockholders' equity (deficit) ............ (120,667) 18,350 (18,350)(e) (120,667) --------- --------- --------- --------- Total liabilities and stockholders' equity ...... $ 258,409 $ 61,916 $ 23,641 $ 343,966 ========= ========= ========= =========
SEE ACCOMPANYING NOTES. BPC HOLDING CORPORATION NOTES TO PRO FORMA UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET (DOLLARS IN THOUSANDS) The historical balance sheet presented for Holding is as of July 3, 1999, and the historical balance sheet presented for CPI Holding is as of July 6, 1999. The following adjustments reflect the acquisition of the common stock of CPI Holding and the repayment of the outstanding debt of CPI Holding on a pro forma basis using proceeds from the issuance of $75 million of 11% senior subordinated notes by Berry. The pro forma allocations to the assets acquired and liabilities assumed have been made using estimates by management and may be adjusted subsequently. The amount allocated to cost in excess of assets acquired may be subsequently adjusted but any such adjustment is not expected to be material. The cost in excess of net assets acquired will be amortized by the straight-line method over a period of 15 years. (a) Adjustment to property and equipment, net: (a) Adjustment to property and equipment, net: Write down to fair market value ..................... $(10,695) ======== (b) Adjustments to intangible assets, net: Elimination of goodwill prior to the acquisition .... $(14,693) Allocation of excess of purchase price over net assets acquired to intangible assets .............. 49,029 -------- $ 34,336 ======== (c) Adjustment to current portion of long-term debt: Repayment of debt ................................... $ (4,987) ======== (d) Adjustments to long-term debt, excluding current portion: Repayment of debt ................................... $(28,022) Issuance of 11% senior subordinated notes ........... 75,000 -------- $ 46,978 ======== (e) Adjustment to stockholders' equity: Elimination of equity prior to acquisition .......... $(18,350) ======== BPC HOLDING CORPORATION PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (DOLLARS IN THOUSANDS)
FISCAL 1998 -------------------------------------------------------------------------------------- NORWICH MOULDERS AND HOLDING CPI HOLDING KNIGHT PLASTICS PRO FORMA CONSOLIDATED HISTORICAL HISTORICAL HISTORICALS ADJUSTMENTS PRO FORMA ------------- -------------- ---------------- -------------- ---------------- Net sales ............................... $ 271,830 $ 53,971 $ 26,869 $ -- $ 352,670 Cost of goods sold ...................... 199,227 43,066 22,786 -- 265,079 --------- --------- --------- --------- --------- Gross margin ............................ 72,603 10,905 4,083 -- 87,591 Operating expenses ...................... 44,001 6,291 3,350 2,289 (a) 334 (d) 56,265 --------- --------- --------- --------- --------- Operating income (loss) ................. 28,602 4,614 733 (2,623) 31,326 Interest expense, net ................... (34,556) (3,384) (48) (5,241)(b) (45,604) (2,375)(e) Other income (expense) .................. (1,865) 6 (2) -- (1,861) --------- --------- --------- --------- --------- Income (loss) before income taxes ................................. (7,819) 1,236 683 (10,239) (16,139) Income tax expense (benefit) ............ (249) 439 196 (439)(c) 143 (f) 90 ========= ========= ========= ========= ========= Net income (loss) ....................... $ (7,570) $ 797 $ 487 $ (9,943) $ (16,229) ========= ========= ========= ========= =========
SEE ACCOMPANYING NOTES. BPC HOLDING CORPORATION NOTES TO PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (DOLLARS IN THOUSANDS) YEAR ENDED JANUARY 2, 1999 The historical consolidated statement of operations presented for Holding is for its fiscal year ended January 2, 1999, and the historical statement of operations presented for CPI Holding is for the twelve months ended November 30, 1998. The historical statement of operations presented for Norwich Moulders is for its six month period ended June 30, 1998 and, the historical statement of operations presented for Knight Plastics is for the period from January 1, 1998 to October 16, 1998. CPI HOLDING ADJUSTMENTS (a) Adjustment to operating expenses: Increase in amortization due to increase in cost in excess of net assets acquired .................................. $(2,289) ======= (b) Adjustments to interest expense: Elimination of interest expense on debt extinguished ...... $(3,384) Additional interest incurred on borrowing for acquisition . 8,625 ------- Net change in interest expense ............................ $ 5,241 ======= (c) Adjustment to income tax expense: Elimination of income tax expense due to Holding's net operating loss carryforward ............................. $ (439) ======= NORWICH MOULDERS AND KNIGHT PLASTICS ADJUSTMENTS (d) Adjustments to operating expense: Amortization of cost in excess of net assets acquired ... $ 334 ======= (e) Adjustments to interest expense: Elimination of interest expense on debt extinguished .... $ (48) Interest incurred on borrowings for the acquisitions .... 2,423 ------- $ 2,375 ======= (f) Adjustments to income tax expense: Acquisition tax adjustments ............................. $ 143 ======= BPC HOLDING CORPORATION PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (DOLLARS IN THOUSANDS)
SIX MONTHS ENDED JULY 3, 1999 ------------------------------------------------------------------------ HOLDING CPI HOLDING PRO FORMA CONSOLIDATED HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA ---------- ------------- ------------- ------------ Net sales ................................... $ 159,852 $ 28,465 $ -- $ 188,317 Cost of goods sold .......................... 112,782 23,407 -- 136,819 --------- --------- --------- --------- Gross margin ................................ 47,070 5,058 -- 52,128 Operating expenses .......................... 25,828 3,119 1,145 (a) 30,092 --------- --------- --------- --------- Operating income (loss) ..................... 21,242 1,939 (1,145) 22,036 Interest expense, net ....................... 17,860 1,400 2,914 (b) 22,174 Other expense ............................... 778 -- -- 778 --------- --------- --------- --------- Income (loss) before income taxes ........... 2,604 539 (4,059) (916) Income tax expense (benefit) ................ 482 202 (202)(c) 482 --------- --------- --------- --------- Net income (loss) ........................... $ 2,122 $ 337 $ (3,857) $ (1,399) ========= ========= ========= =========
SEE ACCOMPANYING NOTES. BPC HOLDING CORPORATION NOTES TO PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (DOLLARS IN THOUSANDS) SIX MONTHS ENDED JULY 3, 1999 The historical consolidated statement of operations presented for Holding is for its six months ended July 3, 1999 and the historical statement of operations presented for CPI Holding is for the six months ended May 31, 1999. (a) Adjustments to operating expenses: Increase in amortization due to increase in cost in excess of net assets acquired ........................ $ 1,145 ======= (b) Adjustments to interest expense: Elimination of interest expense on debt extinguished ... $(1,400) Additional interest incurred on borrowing for CPI Holding acquisition .................................. 4,314 ------- $ 2,914 ======= (c) Adjustment to income tax expense: Elimination of income tax expense due to Holding's net operating loss carryforward ............................ $ (202) ======= UNAUDITED PRO FORMA FINANCIAL INFORMATION OF BERRY PLASTICS CORPORATION (DOLLARS IN THOUSANDS) The following summarizes pro forma unaudited financial information of Holding's wholly owned subsidiary, Berry. The pro forma information is based on the historical consolidated financial statements of Berry, the historical financial statements of CPI Holding, the historical financial statements of Norwich Moulders, and the historical financial statements of Knight Plastics, giving effect to the acquisitions using the purchase method of accounting and the assumptions and adjustments in the accompanying notes to the pro forma condensed consolidated financial statements. The pro forma condensed balance sheet gives effect to the acquisitions as if they had occurred on July 3, 1999 and the pro forma statements of operations give effect to the acquisitions as if they had occurred on December 28, 1998. CONSOLIDATED PRO FORMA BALANCE SHEET Current assets ............................................ $ 93,839 Property and equipment, net of accumulated depreciation ... 141,314 Other noncurrent assets ................................... 104,735 Current liabilities ....................................... 71,214 Noncurrent liabilities .................................... 286,130 Equity (deficit) .......................................... (17,456) CONSOLIDATED STATEMENT OF OPERATIONS Year ended January 2, 1999: Net sales ............................................. $ 352,670 Cost of goods sold .................................... 265,079 Loss before income taxes .............................. (2,670) Net loss .............................................. (2,760) Six months ended July 3, 1999: Net sales ............................................. $ 188,317 Cost of goods sold .................................... 136,819 Income before income taxes ............................ 2,426 Net income ............................................ 2,135 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized. BERRY PLASTICS CORPORATION By: /s/ JAMES M. KRATOCHVIL James M. Kratochvil Vice President, Chief Financial Officer, Treasurer and Secretary Dated: September 20, 1999 -----END PRIVACY-ENHANCED MESSAGE-----