-----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, AcWSlmlWZRMxA5XOvt/MQGVjvceBS9E1MkQNDo3vmsox0PiQTZD/cyMcVH/SknvC KeQKTbsKNK2Pxo/5i1RhRQ== 0000919463-98-000013.txt : 19981111 0000919463-98-000013.hdr.sgml : 19981111 ACCESSION NUMBER: 0000919463-98-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980926 FILED AS OF DATE: 19981110 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BERRY PLASTICS CORP CENTRAL INDEX KEY: 0000919463 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 351813706 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-75706 FILM NUMBER: 98743586 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 10-Q 1 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 26, 1998 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from___________________to__________________ Commission File Number 33-75706, 33-75706-01; 33-75706-02, 33-75706-03 BERRY PLASTICS CORPORATION BPC HOLDING CORPORATION BERRY IOWA CORPORATION BERRY TRI-PLAS CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 35-1814673 (State or other jurisdiction of incorporation or organization) (IRS employer identification no.) 101 OAKLEY STREET, EVANSVILLE, INDIANA 47710 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (812) 424-2904 NONE (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [ ] Yes [ X ] No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Number of Shares Outstanding COMMON STOCK AS OF SEPTEMBER 27, 1998 Class A - Voting - $.01 Par Value 91,000 Class A - Nonvoting - $.01 Par Value 259,000 Class B - Voting - $.01 Par Value 144,936 Class B - Nonvoting - $.01 Par Value 58,168 Class C - Nonvoting - $.01 Par Value 16,960 1 BPC HOLDING CORPORATION AND SUBSIDIARIES FORM 10-Q INDEX FOR QUARTERLY PERIOD ENDED SEPTEMBER 26, 1998 PAGE NO. Part I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets 3 Consolidated Statements of Operations 5 Consolidated Statements of Cash Flows 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 17 SIGNATURE 18 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements BPC Holding Corporation and Subsidiaries Consolidated Balance Sheets (In Thousands of Dollars)
SEPTEMBER 26, DECEMBER 27, 1998 1997 (UNAUDITED) ASSETS Current assets: Cash and cash equivalents $ 7,122 $ 2,688 Accounts receivable (less allowance for doubtful accounts of $844 at September 26, 1998 and $1,038 at December 27, 1997) 35,208 28,385 Inventories: Finished goods 19,538 22,029 Raw materials and supplies 6,885 7,429 ------- ------- 26,423 29,458 Prepaid expenses and other receivables 2,427 1,834 Income taxes recoverable 355 1,167 ------- ------- Total current assets 71,535 63,532 Assets held in trust 13,121 19,738 Property and equipment: Land 6,663 5,811 Buildings and improvements 31,298 33,891 Machinery, equipment and tooling 135,190 122,991 Automobiles and trucks 1,341 1,241 Construction in progress 9,052 10,357 ------- ------- 183,544 174,291 Less accumulated depreciation 78,980 66,073 ------- ------- 104,564 108,218 Intangible assets: Deferred financing and origination fees, net 11,249 10,849 Covenants not to compete, net 3,597 3,940 Excess of cost over net assets acquired, net 41,228 30,303 Deferred acquisition costs 163 13 ------- ------- 56,237 45,105 Deferred income taxes 2,049 2,049 Other 1,015 802 ------- ------- Total assets $248,521 $239,444 ======= =======
3 BPC Holding Corporation and Subsidiaries Consolidated Balance Sheets (continued) (In Thousands of Dollars)
SEPTEMBER 26, DECEMBER 27, 1998 1997 (UNAUDITED) LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable $ 17,383 $ 16,732 Accrued expenses and other liabilities 10,005 7,162 Accrued interest 10,020 3,612 Employee compensation and payroll taxes 10,680 7,489 Income taxes 147 55 Current portion of long-term debt 18,280 7,619 ------- ------- Total current liabilities 66,515 42,669 Long-term debt, less current portion 290,111 298,716 Accrued dividends on preferred stock 6,294 3,674 Other liabilities 679 3,360 ------- ------- 363,599 348,419 Stockholders' equity (deficit): Class A Preferred Stock; 800,000 shares authorized; 600,000 shares issued and outstanding (net of discount of $2,843 at September 26, 1998 and $3,062 at December 27, 11,728 11,509 1997) Class 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; 144,936 shares issued and outstanding 1 1 Nonvoting; 500,000 shares authorized; 58,168 shares issued and outstanding 1 1 Class C Common Stock; $.01 par value: Nonvoting; 500,000 shares authorized; 16,960 shares issued and outstanding - - Treasury stock: 726 shares (81) (22) Additional paid-in capital 46,616 49,374 Warrants 3,511 3,511 Retained earnings (deficit) (181,970) (178,353) Cumulative foreign currency translation adjustment 112 - ------- ------- Total stockholders' equity (deficit) (115,078) (108,975) ------- ------- Total liabilities and stockholders' equity (deficit) $ 248,521 $ 239,444 ======= =======
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 4 BPC Holding Corporation and Subsidiaries Consolidated Statements of Operations (In Thousands of Dollars)
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED SEPTEMBER 26, SEPTEMBER 27, SEPTEMBER 26, SEPTEMBER 27, 1998 1997 1998 1997 (UNAUDITED) (UNAUDITED) Net sales $68,800 $58,780 $205,116 $164,715 Cost of goods sold 51,066 46,887 151,083 129,054 ------- ------- ------- ------- Gross margin 17,734 11,893 54,033 35,661 Operating expenses: Selling 3,769 2,955 10,881 8,048 General and administrative 4,502 2,889 13,301 8,613 Research and development 488 333 1,231 935 Amortization of intangibles 776 505 2,483 1,129 Other 877 1,042 3,240 2,783 ------- ------- ------- ------- Operating income 7,322 4,169 22,897 14,153 Other income and expense: Loss (gain) on disposal of property and equipment 62 (1) 492 89 ------- ------- ------- ------- Income before interest and income taxes 7,260 4,170 22,405 14,064 Interest: Expense (9,083) (8,117) (26,524) (23,667) Income 259 443 833 1,598 ------- ------- ------- ------- Loss before income taxes (1,564) (3,504) (3,286) (8,005) Income tax expense 306 58 331 151 ------- ------- ------- ------- Net loss (1,870) (3,562) (3,617) (8,156) Preferred stock dividends (837) (710) (2,620) (1,757) ------- ------- ------- ------- Net loss attributable to common stockholders $ (2,707) $ (4,272) $ (6,237) $ (9,913) ======= ======= ======= =======
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 5 6 BPC Holding Corporation and Subsidiaries Consolidated Statements of Cash Flows (In Thousands of Dollars)
THIRTY-NINE WEEKS ENDED SEPTEMBER 26, SEPTEMBER 27, 1998 1997 (UNAUDITED) OPERATING ACTIVITIES Net loss $ (3,617) $ (8,156) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 15,466 11,493 Non-cash interest expense 1,335 1,139 Amortization 2,483 1,129 Write off of financing fees - 390 Interest paid from assets held in trust 6,617 5,052 Loss on sale of property and equipment 492 89 Changes in operating assets and liabilities: Accounts receivable, net (3,590) (8,724) Inventories 3,492 2,883 Prepaid expenses and other receivables 316 (83) Accounts payable and accrued expenses 5,935 4,193 Other assets (349) 209 ------- ------- Net cash provided by operating activities 28,580 9,614 INVESTING ACTIVITIES Additions to property and equipment (13,540) (8,795) Proceeds from disposal of property and equipment 4,452 1,092 Acquisitions of businesses (15,948) (83,529) ------- ------- Net cash used for investing activities (25,036) (91,232) FINANCING ACTIVITIES Proceeds from borrowings 42,254 79,296 Payments on borrowings (40,244) (2,991) Debt issuance costs (1,141) (2,761) Proceeds from issuance of common stock 80 324 Purchase of stock from management (59) - ------- ------- Net cash provided by financing activities 890 73,868 ------- ------- Net increase (decrease) in cash and cash 4,434 (7,750) equivalents Cash and cash equivalents at beginning of period 2,688 10,192 ------- ------- Cash and cash equivalents at end of period $ 7,122 $ 2,442 ======= =======
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 6 7 BPC Holding Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of BPC Holding Corporation and its subsidiaries (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Preparation of the financial statements require management to make estimates that affect the required amounts of assets, liabilities, revenues, and expenses. 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: Venture Packaging, Inc. ("Venture Packaging"), Venture Packaging Midwest, Inc., Venture Packaging Southeast, Inc., PackerWare Corporation ("Packerware"), Berry Iowa Corporation, Berry Tri-Plas Corporation, Berry Sterling Corpor- ation, Berry Plastics Design Corporation ("Berry Design"), NIM Holdings Limited ("NIM Holdings"), Norwich Injection Moulders Limited ("Norwich Moulders"), and AeroCon, Inc. For further information, refer to the consolidated financial statements and footnotes thereto included in Holding's and Berry's Form 10-K's filed with the Securities and Exchange Commission for the year ended December 27, 1997. Certain amounts on the 1997 financial statements have been reclassified to conform with the 1998 presentation. 2. ACQUISITIONS On January 17, 1997, Berry acquired certain assets and assumed certain liabilities of Container Industries, Inc. ("Container Industries") of Pacoima, California for $2.9 million. The purchase was funded out of operating funds. The operations of Container Industries are included in the Berry's operations since the acquisition date using the purchase method of accounting. On January 21, 1997, Berry acquired the outstanding stock of PackerWare, a Kansas corporation, for aggregate consideration of approximately $28.1 million by way of a merger of PackerWare with a newly-formed, wholly- owned subsidiary of Berry (with PackerWare being the surviving corporation). The purchase was primarily financed through the Credit Facility (see Note 3). The operations of PackerWare are included in Berry's operations since the acquisition date using the purchase method of accounting. On May 13, 1997, Berry Design, a newly-formed wholly-owned subsidiary of Berry, acquired substantially all of the assets and assumed certain liabilities of Virginia Design Packaging Corp. ("Virginia Design") for approximately $11.1 million. The purchase was financed through the Credit Facility (see Note 3). The operations of Berry Design are included in Berry's operations since the acquisition date using the purchase method of accounting. 7 8 2. ACQUISITIONS (CONTINUED) On August 29, 1997, Berry acquired the outstanding common stock of Venture Packaging for aggregate consideration of $43.7 million by way of a merger of Venture Packaging with a newly formed subsidiary of Berry (with Venture Packaging being the surviving corporation). The purchase was primarily financed through the Credit Facility (see Note 3). Additionally, preferred stock and warrants were issued to certain selling shareholders of Venture Packaging. The operations of Venture Packaging are included in Berry's operations since the acquisition date using the purchase method of accounting. On July 2, 1998, NIM Holdings, a newly-formed, wholly-owned subsidiary of Berry, acquired all of the capital stock of Norwich Moulders of Norwich, England for aggregate consideration of approximately $14.0 million. The purchase was primarily financed through the Credit Facility (see Note 3). The operations of Norwich Moulders are included in Berry's operations since the acquisition date using the purchase method of accounting. The pro forma results listed below are unaudited and reflect purchase accounting adjustments assuming the Container Industries, PackerWare, Virginia Design, Venture Packaging, and Norwich Moulders acquisitions occurred on December 29, 1996.
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED SEPTEMBER 27, 1997 SEPTEMBER 27, 1997 SEPTEMBER 26, 1998 -------------------------------------------------------------------- (In Thousands) Net sales $ 72,995 $ 205,008 $ 211,977 Loss before income taxes (3,502) (8,621) (4,873) Net loss attributable to common stockholders (4,279) (10,714) (6,144)
The pro forma financial information is presented for informational purposes only and is not necessarily indicative of the operating results that would have occurred had the acquisitions been consummated at the above date, nor are they necessarily indicative of future operating results. Further, the information gathered on the acquired companies is based upon unaudited internal financial information and reflects only pro forma adjustments for additional interest expense and amortization of the excess of the cost over the underlying net assets acquired, net of the applicable income tax effect. 3. LONG-TERM DEBT Long-term debt consists of the following:
SEPTEMBER 26, DECEMBER 27, 1998 1997 --------------------------------------------- (In Thousands) Holding 12.50% Senior Secured Notes $105,000 $105,000 Berry 12.25% Senior Subordinated Notes 125,000 100,000 Term loans 72,340 58,300 Revolving line of credit - 25,654 Nevada Industrial Revenue Bonds 4,500 5,000 Iowa Industrial Revenue Bonds - 5,400 South Carolina Industrial Development Bonds - 6,985 Capital lease obligations 682 547 Debt premium (discount), net 869 (551) ------- ------- 308,391 306,335 Less current portion of long-term debt 18,280 7,619 ------- ------- $290,111 $298,716 ======= =======
The current portion of long-term debt at September 26, 1998 consists of $17.5 million of quarterly installments on the term loans, $0.5 million of repayments on the Nevada Industrial Revenue Bonds and the monthly principal payments related to a capital lease obligation. On August 24, 1998, Berry completed an offering of $25.0 million aggregate principal amount of 12.25% Senior Subordinated Notes due 2004 (the "1998 Notes"). The 1998 Notes mature on April 15, 2004 and interest is payable semi-annually on October 15 and April 15 of each year and commenced on October 15, 1998. The 1998 Notes are unconditionally guaranteed on a senior subordinated basis by Holding and all of Berry's subsidiaries. The net proceeds to Berry from the sale of the 1998 notes, after expenses, were $25.2 million. Berry applied the net proceeds to repay borrowings under Berry's revolving line of credit. The 1998 Notes rank PARI PASSU with or senior in right of payment to all existing and future subordinated indebtedness of Berry. The notes rank junior in right of payment to all existing and future senior indebtedness of Berry, including borrowings under the Credit Facility and the Nevada Industrial Revenue Bonds. 8 9 3. LONG-TERM DEBT (CONTINUED) Concurrent with the PackerWare acquisition, Berry entered into a financing and security agreement with NationsBank, N.A. (the "Credit Agreement") for a senior secured line of credit in an aggregate principal amount of $60.0 million (the "Credit Facility"). As a result of the acquisition of assets of Virginia Design and the acquisition of Venture Packaging, the Credit Facility was amended and increased to $127.2 million. Concurrently with the Norwich Moulders acquisition, the Credit Facility was again amended and increased to $132.6 million plus an additional revolving line of credit facility of (1.5 million (the "UK Revolver") and a term loan facility of (4.5 million (the "UK Term Debt"). The indebtedness under the Credit Facility is guaranteed by Holding and Berry's subsidiaries. The amended Credit Facility provides the Company with a $50.0 million revolving line of credit, subject to a borrowing base formula; a $64.4 million term loan facility; the UK Revolver, subject to a borrowing base formula; the UK Term Debt, and a $4.6 million standby letter of credit facility to support Berry's obligation under the Nevada Industrial Revenue Bond. The Credit Facility also provides the Company with a term loan facility which was used to finance the repayment of the South Carolina Industrial Development Bonds as discussed below. Based on the borrowing formula as of September 26, 1998, Berry had approximately $40.4 million of additional available credit under the revolving line of credit. The Credit Facility matures on January 21, 2002 unless previously terminated by Berry or by the lenders upon an Event of Default as defined in the Credit Agreement. The term loan facility requires periodic quarterly payments, varying in amount, through the maturity of the facility. Interest on borrowings on the Credit Facility will be based on the lender's base rate plus .5% or LIBOR plus 2.0%, at Berry's option. The Credit Facility contains various covenants which include, among other things: (i) maintenance of certain financial ratios and compliance with certain financial tests and limitations, (ii) limitations on the issuance of additional indebtedness, and (iii) limitations on capital expenditures. On July 30, 1998, the Iowa Industrial Revenue Bonds were repaid by the Company through borrowings under its term debt as provided in the Credit Facility. The South Carolina Industrial Development Bonds were repaid by the Company on August 27, 1998, in conjunction with the closing and sale of the Anderson, South Carolina facility. The difference between the net proceeds from the sale of the facility and the repayment of the development bonds and other related liabilities of approximately $3.0 million has been financed in October 1998 with borrowings under a term loan within the Credit Facility. 9 10 BERRY PLASTICS CORPORATION SUMMARY FINANCIAL INFORMATION The following summarizes financial information of Holding's wholly-owned subsidiary, Berry Plastics Corporation, and its subsidiaries.
SEPTEMBER 26, DECEMBER 27, 1998 1997 ---------------- ----------------- CONSOLIDATED BALANCE SHEETS (In Thousands) Current assets $ 70,555 $ 62,824 Property and equipment - net of accumulated depreciation 104,564 108,218 Other noncurrent assets 55,472 44,480 Current liabilities 62,801 42,158 Noncurrent liabilities 185,790 205,172 Equity (deficit) (18,000) (31,808)
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED SEPTEMBER 26, SEPTEMBER 27, SEPTEMBER 26, SEPTEMBER 27, 1998 1997 1998 1997 --------------------------------------------------------------------- STATEMENT OF OPERATIONS (In Thousands) Net sales $ 68,800 $ 58,780 $ 205,116 $ 164,715 Cost of goods sold 51,066 46,887 151,083 129,054 Income (loss) before income taxes 1,652 (399) 6,223 1,014 Net income (loss) 1,346 (404) 5,892 912
5. RECENT ACCOUNTING PRONOUNCEMENTS On December 28, 1997, the Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (FAS 130) which establishes new rules for the reporting and display of comprehensive income and its components (net income and "other comprehensive income"). Adoption of the Statement had no material impact on the Company's financial position. Comprehensive losses were $1.8 million and $3.5 million for the thirteen weeks and thirty-nine weeks ended September 26, 1998, respectively. In June 1997, the Financial Accounting Standards Board issued Statement No. 131, "Disclosure About Segments of an Enterprise and Related Information" (FAS 131). FAS 131 establishes requirements for reporting information about operating segments in annual and interim reports and is effective for the Company in 1998, but need not be applied to interim financial statements in the initial year of application. FAS 131 may require a change in the Company's financial reporting; however, the extent of the change, if any, has not been determined. 6. SUBSEQUENT TRANSACTION On October 16, 1998, Knight Plastics, Inc., a newly formed wholly-owned subsidiary of Berry, acquired substantially all of the assets of the Knight Engineering and Plastics Division of Courtaulds Packaging Inc. for aggregate consideration of approximately $18.0 million. The purchase was financed through the Credit Facility's revolving line of credit. 10 11 Item 2. BPC Holding Corporation and Subsidiaries Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion includes certain forward-looking statements. Actual results could differ materially from those reflected by the forward- looking statements in the discussion, and a number of factors could adversely affect future results, liquidity and capital resources. These factors include, among other things, the Company's ability to pass through raw material price increases to its customers, its ability to service debt, the availability of plastic resin, the impact of changing environmental laws and changes in the level of the Company's capital investment. Although management believes it has the business strategy and resources needed for improved operations, future revenue and margin trends cannot be reliably predicted. RESULTS OF OPERATIONS 13 WEEKS ENDED SEPTEMBER 26, 1998 (THE "QUARTER") COMPARED TO 13 WEEKS ENDED SEPTEMBER 27, 1997 (THE "PRIOR QUARTER") NET SALES. Net sales increased $10.0 million, or 17%, to $68.8 million for the Quarter from $58.8 million for the Prior Quarter with an approximate 2% decrease in net selling prices due mainly to competitive market conditions. The increase in net sales was primarily attributed to the addition of Venture Packaging and Norwich Moulders with Quarter net sales of approximately $9.6 million and $3.6 million, respectively. Non-Venture Packaging container sales decreased approximately $4.1 million due to the Company's decision to exit low margin business and competitive pricing as noted above. GROSS MARGIN. Gross margin increased by $5.8 million to $17.7 million for the Quarter from $11.9 million for the Prior Quarter. This increase of 49% includes the combined impact of added sales volume, productivity improvement initiatives, and the cyclical impact of lower raw material costs compared to the Prior Quarter. OPERATING EXPENSES. Selling expenses increased by $0.8 million to $3.8 million for the Quarter from $3.0 million for the Prior Quarter principally as a result of expanded sales coverage and increased product development and marketing expenses. General and administrative expenses increased from $2.9 million for the Prior Quarter to $4.5 million for the Quarter. The increase of $1.6 million is primarily attributable to increased accrued employee profit sharing expense. During the Quarter, one-time transition expenses primarily related to the shutdown of the Anderson facility were $0.9 million. In the Prior Quarter, one-time transition expenses for the 1997 acquisitions were $1.0 million. INTEREST EXPENSE. Interest expense increased $1.0 million to $9.1 million for the Quarter compared to $8.1 million for the Prior Quarter primarily due to additional borrowings under the Credit Facility (see Note 3) to support the 1997 and Norwich Moulders acquisitions (see Note 2). INCOME TAX. For the Quarter, the Company's income tax expense was $0.3 million compared to an income tax expense of $0.1 million for the Prior Quarter. The Company continues to operate in a net operating loss carryforward position for federal income tax purposes. NET LOSS. Net loss for the Quarter of $1.9 million represented a favorable change of $1.7 million from the net loss of $3.6 million for the Prior Quarter for the reasons discussed above. 39 Weeks Ended September 26, 1998 ("YTD") Compared to 39 Weeks Ended September 27, 1997 ("prior YTD") NET SALES. Net sales increased $40.4 million, or 25%, to $205.1 million for the YTD from $164.7 million for the prior YTD with an approximate 2% decrease in net selling prices due mainly to competitive market conditions. The increase in net sales can be primarily attributed to the addition of Venture Packaging with YTD net sales of approximately $30.6 million, the addition of Norwich Moulders with YTD net sales of $3.6 million, and higher non-Venture Packaging container sales of $3.5 million. GROSS MARGIN. Gross margin increased by $18.4 million to $54.0 million for the YTD from $35.7 million for the prior YTD. This increase in gross margin can be attributed to the combined impact of additional sales volume, productivity improvement initiatives, and the cyclical impact of lower raw material costs. OPERATING EXPENSES. Selling expenses increased by $2.9 million to $10.9 million for the YTD from $8.0 million for the prior YTD principally as a result of expanded sales coverage related to the acquisition of Venture Packaging, increased product development and marketing expenses. General and administrative expenses increased by $4.7 million to $13.3 million YTD from $8.6 million for the prior YTD. The increase of $4.7 million is primarily attributable to increased patent litigation expenses and increased accrued employee profit sharing expense. YTD one-time transition expenses include $2.2 million related to the shutdown of the Reno and Anderson facilities and $1.0 million related to the 1997 acquisitions. One-time transition expenses for prior YTD were $2.0 million related to the 1997 acquisitions and $0.8 million related to the Winchester and Reno plant consolidations. INTEREST EXPENSE. Interest expense increased $2.8 million to $26.5 million for the YTD compared to $23.7 million for the prior YTD primarily due to additional borrowings under the Credit Facility (see Note 3) to support the 1997 and Norwich Moulders acquisitions (see Note 2). INCOME TAX. The Company's income tax expense was $0.3 million for the YTD compared to $0.2 million in the prior YTD. The Company continues to operate in a net operating loss carryforward position for federal income tax purposes. 11 12 NET LOSS. Net loss for the YTD of $3.6 million improved $4.5 million from a net loss of $8.1 million for the prior YTD for the reasons discussed above. LIQUIDITY AND SOURCES OF CAPITAL Net cash provided by operating activities was $28.6 million for the YTD, an increase of $19.0 million from the prior YTD. The increase is primarily the result of improved operating performance with income before depreciation and amortization increasing $9.7 million from prior YTD. Adjusted EBITDA, defined as income before taxes, interest, depreciation, amortization, loss (gain) on disposal of property and equipment, write-off of deferred acquisition costs, write-off of financing fees, and one-time transition expenses, was $14.5 million for the Quarter compared to $10.0 million for the Prior Quarter and $44.2 million YTD compared to $29.5 million for the prior YTD. Net cash provided by operating activities for the YTD was $28.6 million compared to $9.6 million for the prior YTD. $25.0 million and $91.2 million of cash was used for investing activities for the YTD and the prior YTD, respectively. Financing activities provided $0.9 million and $73.9 million of cash for the YTD and the prior YTD, respectively. Net working capital changes (defined as accounts receivable, inventories, prepaid expenses, other receivables, accounts payable and accrued expenses) also increased YTD cash $7.3 million from the prior YTD. YTD capital spending of $13.5 million included $7.4 million for molds and machines, and $6.1 million for building and accessory equipment. Berry currently intends to finance future capital spending through cash flow from operations, existing cash balances, and cash available under the Credit Facility's revolving line of credit. At September 26, 1998, the Company's cash balance was $7.1 million, and Berry had unused borrowing capacity under the Credit Facility's borrowing base of approximately $40.4 million. IMPACT OF YEAR 2000 The Company has been working on modifying or replacing portions of its software since 1991 so that its computer systems will function properly with respect to dates in the Year 2000 and thereafter. Because the Company commenced this process early, the costs incurred to address this issue in any single year have not been significant. The Company's current business applications are Year 2000 compliant. Acquired businesses are converted to the Company's applications not only for Year 2000 issues but to keep consistency in applications and reporting. The most recent acquisition is targeted to be converted to the Company's common applications on January 4, 1999. Also, the Company is currently replacing significant portions of its primary information systems, principally because of the growth the Company has experienced in recent years due to acquisitions. Such replacement will allow the Company to continue to achieve its future growth plans and will be fully Year 2000 compliant. The Company anticipates that the implementation of such systems will occur before the Year 2000. Any future acquisitions may require a conversion to existing applications if there are any delays installing the new application. The current estimated cost for replacing or fixing non-business application systems is $110,000. These systems include personal computers, postage machines, plant automation, and telephone systems. Vendor survey responses are expected back by the end of 1998. After a review of the responses, a plan will be put in place by the end of March 1999 to minimize the risk of vendors that may not meet the Year 2000 deadline. To date, the Company is not aware of any external agent with a Year 2000 issue that would materially impact the Company's results of operations, liquidity, or capital resources. However, the Company has no means of ensuring that external agents will be Year 2000 ready. The inability of external agents to complete their Year 2000 resolution process in a timely fashion could materially impact the Company. The effect of non-compliance by external agents is not determinable. Management of the Company believes it has an effective program in place to resolve the Year 2000 issue in a timely manner. However, the Company could incur a material disruption, such as the inability to produce product, should significant suppliers not be Year 2000 ready. In addition, disruptions in the economy resulting from Year 2000 issues could also materially adversely affect the Company. The amount of potential liability and lost revenue cannot be reasonably estimated at this time. The Company currently has no contingency plans in place in the event it does not complete all phases of the Year 2000 program. The Company plans to evaluate the status of completion in March 1999 and determine whether such a plan is necessary. 12 13 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: None (b) Reports on Form 8-K: A Current Report on Form 8-K, dated July 2, 1998, was filed by Berry. Under Item 2, Acquisition or Disposition of Assets, Berry reported the consummation of the Norwich Moulders acquis- ition. No financial statements were included in the Form 8-K. The Form 8-K was amended by the filing of the Form 8-K/A on September 15, 1998, which includes the financial statements of the business acquired and pro forma financial information. 13 14 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Berry Plastics Corporation BPC Holding Corporation Berry Iowa Corporation Berry Tri-Plas Corporation November 10, 1998 /S/ JAMES M. KRATOCHVIL James M. Kratochvil Executive Vice President, Chief Financial Officer, Treasurer and Secretary of Berry Plastics Corporation and its Subsidiaries (Principal Financial and Accounting Officer) 14 EX-27 2
5 1000 9-MOS JAN-02-1999 SEP-26-1998 7122 0 35208 844 26423 71535 183544 78980 248521 66515 290111 0 16728 6 (131812) 248521 205116 0 151083 182219 0 564 26524 (3286) 331 (3617) 0 0 0 (3617) 0 0
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