-----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, EnxeXtyAkK2nuc07LZk+XY9rAiRr8vv3+qXchgFQQugwHbbxi8USMYGzfIEzjMgd C8JUC8KmcGGNl9a1jZQSEQ== 0000919463-01-500007.txt : 20020410 0000919463-01-500007.hdr.sgml : 20020410 ACCESSION NUMBER: 0000919463-01-500007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010929 FILED AS OF DATE: 20011109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BPC HOLDING CORP CENTRAL INDEX KEY: 0000919465 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 351814673 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-75706-01 FILM NUMBER: 1779391 BUSINESS ADDRESS: STREET 1: 101 OAKLEY ST STREET 2: P O BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47710 BUSINESS PHONE: 8124242904 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: 1934 Act SEC FILE NUMBER: 033-75706 FILM NUMBER: 1779390 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 plasq3rdqtr01.txt DOCUMENT 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 29, 2001 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 BPC HOLDING CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 35-1814673 (State or other jurisdiction (IRS employer of incorporation or organization) identification number)
BERRY PLASTICS CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 35-1813706 (State or other jurisdiction (IRS employer of incorporation or organization) identification number) 101 Oakley Street 47710 Evansville, Indiana (Address of principal executive offices) (Zip code)
Registrants' telephone number, including area code: (812) 424-2904 NONE (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.[X]Yes [ ]No Indicate the number of shares outstanding of each of issuers' classes of common stock, as of the latest practicable date: As of October 25, 2001, the following shares of capital stock of BPC Holding Corporation were outstanding: 91,000 shares of Class A Voting Common Stock; 259,000 shares of Class A Nonvoting Common Stock; 144,546 shares of Class B Voting Common Stock; 59,222 shares of Class B Nonvoting Common Stock; and 16,833 shares of Class C Nonvoting Common Stock. As of October 25, 2001 there were outstanding 100 shares of the Common Stock, $.01 par value, of Berry Plastics Corporation. 1 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS THIS FORM 10-Q CONTAINS STATEMENTS THAT CONSTITUTE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). THOSE STATEMENTS APPEAR IN A NUMBER OF PLACES IN THIS FORM 10-Q AND INCLUDE STATEMENTS REGARDING THE INTENT, BELIEF OR CURRENT EXPECTATIONS OF THE COMPANY. WITHOUT LIMITING THE FOREGOING, THE WORDS "BELIEVES," "ANTICIPATES," "PLANS," "EXPECTS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. ANY SUCH FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND MAY INVOLVE RISKS AND UNCERTAINTIES, AND ACTUAL RESULTS MAY DIFFER FROM THOSE IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS. VARIOUS ECONOMIC AND COMPETITIVE FACTORS COULD CAUSE ACTUAL RESULTS OR EVENTS TO DIFFER MATERIALLY FROM THOSE DISCUSSED IN SUCH FORWARD-LOOKING STATEMENTS. THE ACCOMPANYING INFORMATION CONTAINED IN THIS FORM 10-Q, INCLUDING, WITHOUT LIMITATION, THE INFORMATION SET FORTH UNDER "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS," IDENTIFIES IMPORTANT FACTORS THAT COULD CAUSE DIFFERENCES, INCLUDING 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. 2 BPC HOLDING CORPORATION BERRY PLASTICS CORPORATION FORM 10-Q INDEX FOR QUARTERLY PERIOD ENDED SEPTEMBER 29, 2001 PAGE NO. Part I. Financial Information Item 1. Financial Statements: Consolidated Balance Sheets 4 Consolidated Statements of Operations 6 Consolidated Statements of Cash Flows 7 Notes to Consolidated Financial Statements 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 17 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 21 Signature 22 3 PART 1. FINANCIAL INFORMATION Item 1. Financial Statements BPC Holding Corporation and Subsidiaries Consolidated Balance Sheets (In Thousands of Dollars)
SEPTEMBER 29, DECEMBER 30, 2001 2000 ------------ ------------ (UNAUDITED) Assets Current assets: Cash and cash equivalents $ 3,292 $ 2,054 Accounts receivable(less allowance for doubtful accounts of $2,503 at September 29, 2001 and $1,724 at December 30, 2000) 61,772 48,397 Inventories: Finished goods 37,656 38,157 Raw materials and supplies 11,569 10,822 -------- -------- 49,225 48,979 Prepaid expenses and other receivables 7,599 5,272 -------- -------- Total current assets 121,888 104,702 Property and equipment: Land 9,138 8,894 Buildings and improvements 69,386 60,572 Machinery, equipment and tooling 220,284 203,569 Construction in progress 40,399 16,901 -------- -------- 339,207 289,936 Less accumulated depreciation 135,847 110,132 -------- -------- 203,360 179,804 Intangible assets: Deferred financing and origination fees,net 9,100 10,422 Covenants not to compete, net 2,699 3,388 Excess of cost over net assets acquired,net 123,339 114,680 -------- -------- 135,138 128,490 Other 94 126 -------- -------- Total assets $460,480 $413,122 ======== ========
4 BPC Holding Corporation and Subsidiaries Consolidated Balance Sheets (continued) (In Thousands of Dollars)
SEPTEMBER 29, DECEMBER 30, 2001 2000 ------------ ------------ (UNAUDITED) LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable $ 41,743 $ 26,779 Accrued expenses and other liabilities 11,594 10,430 Accrued interest 14,024 9,006 Employee compensation and payroll taxes 21,124 14,785 Current portion of long-term debt 23,411 23,232 -------- -------- Total current liabilities 111,896 84,232 Long-term debt, less current portion 450,696 445,574 Accrued dividends on preferred stock 24,751 17,656 Other liabilities 4,774 3,657 -------- -------- 592,117 551,119 Stockholders' equity (deficit): Series A Preferred Stock; 600,000 shares authorized, issued and outstanding (net of discount of $1,965 at September 29, 2001 and $2,185 at December 30, 2000) 12,605 12,386 Series A-1 Preferred Stock; 1,400,000 shares authorized; 1,000,000 shares issued and outstanding (net of discount of $4,851 at September 29, 2001 and $5,400 at December 30, 2000) 20,149 19,600 Series B Preferred Stock; 200,000 shares authorized, issued and outstanding 5,000 5,000 Series C Preferred Stock; 13,168 shares authorized, issued and outstanding 10,000 - Class A Common Stock; $.01 par value: Voting; 500,000 shares authorized; 91,000 shares issued and outstanding 1 1 Nonvoting; 500,000 shares authorized; 259,000 shares issued and outstanding 3 3 Class B Common Stock; $.01 par value: Voting; 500,000 shares authorized; 145,058 shares issued and 144,546 shares outstanding 1 1 Nonvoting; 500,000 shares authorized; 61,325 shares issued and 59,222 shares outstanding 1 1 Class C Common Stock; $.01 par value: Nonvoting; 500,000 shares authorized; 17,000 shares issued and 16,833 shares outstanding - - Treasury stock: 512 shares Class B Voting Common Stock; 2,103 shares Class B Nonvoting Common Stock; and 167 shares Class C Nonvoting Common Stock (405) (405) Additional paid-in capital 27,919 35,041 Warrants 9,386 9,386 Retained earnings (deficit) (215,061) (218,168) Accumulated other comprehensive loss (1,236) (843) -------- -------- Total stockholders' equity (deficit) (131,637) (137,997) -------- -------- Total liabilities and stockholders' equity (deficit) $ 460,480 $ 413,122 ======== ======== 5
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. BPC Holding Corporation and Subsidiaries Consolidated Statements of Operations (In Thousands of Dollars)
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED --------------------------------------------------------------- SEPTEMBER 29, SEPTEMBER 30, SEPTEMBER 29, SEPTEMBER 30, 2001 2000 2001 2000 --------------------------------------------------------------- (UNAUDITED) (UNAUDITED) Net sales $ 121,910 $ 105,645 $ 362,923 $ 310,014 Cost of goods sold 91,311 80,603 264,330 237,508 -------- -------- -------- -------- Gross profit 30,599 25,042 98,593 72,506 Operating expenses: Selling 5,551 5,822 16,977 16,573 General and administrative 6,310 5,541 22,558 18,233 Research and development 564 584 1,495 2,146 Amortization of intangibles 3,290 3,025 9,386 7,503 Other expenses 700 632 2,993 4,907 -------- -------- -------- -------- Operating income 14,184 9,438 45,184 23,144 Other expenses (income): Loss (gain) on disposal of property and equipment 433 (62) 389 553 -------- -------- -------- -------- Income before interest, taxes, and extraordinary item 13,751 9,500 44,795 22,591 Interest: Expense (13,500) (13,470) (41,507) (37,516) Income 9 23 33 76 -------- -------- -------- -------- Income (loss) before income taxes and extraordinary item 260 (3,947) 3,321 (14,849) Income taxes 84 30 215 55 -------- -------- -------- -------- Net income (loss) before extraordinary item 176 (3,977) 3,106 (14,904) Extraordinary item (less applicable income taxes of $0) - - - 1,022 -------- -------- -------- -------- Net income (loss) 176 (3,977) 3,106 (15,926) Preferred stock dividends (2,610) (1,970) (7,094) (4,586) Amortization of preferred stock discount (256) (292) (768) (511) -------- -------- -------- -------- Net loss attributable to common stockholders $ (2,690) $ (6,239) $ (4,756) $(21,023) ======== ======== ======== ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 6 BPC Holding Corporation and Subsidiaries Consolidated Statements of Cash Flows (In Thousands of Dollars)
THIRTY-NINE WEEKS ENDED --------------------------------- SEPTEMBER 29, SEPTEMBER 30, 2001 2000 ---------------------------------- (UNAUDITED) OPERATING ACTIVITIES Net income (loss) $ 3,106 $ (15,926) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 27,756 22,743 Non-cash interest expense 14,855 13,113 Amortization 9,386 7,503 Non-cash compensation expense 450 - Write-off deferred financing and origination fees - 1,022 Loss on sale of property and equipment 389 553 Changes in operating assets and liabilities: Accounts receivable, net (8,906) (7,337) Inventories 3,350 3,567 Prepaid expenses and other receivables (3,475) (6,779) Other assets 32 1,317 Payables and accrued expenses 10,394 (173) -------- -------- Net cash provided by operating activities 57,337 19,603 INVESTING ACTIVITIES Additions to property and equipment (23,943) (23,662) Proceeds from disposal of property and equipment 96 1,197 Acquisitions of businesses, net of cash acquired (23,513) (64,348) -------- -------- Net cash used for investing activities (47,360) (86,813) FINANCING ACTIVITIES Proceeds from long-term borrowings 2,000 64,974 Payments on long-term borrowings (20,470) (14,411) Issuance of common stock 291 - Issuance of preferred stock and warrants 10,000 25,000 Debt origination costs (1,009) (1,245) Purchase of treasury stock - (112) -------- -------- Net cash provided by (used for) financing activities (9,188) 74,206 Effect of exchange rate changes on cash 449 250 -------- -------- Net increase in cash and cash equivalents 1,238 7,246 Cash and cash equivalents at beginning of period 2,054 2,546 -------- -------- Cash and cash equivalents at end of period $ 3,292 $ 9,792 ======== ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 7 BPC Holding Corporation and Subsidiaries Notes to Consolidated Financial Statements (In thousands of dollars, except as otherwise noted) (Unaudited) 1. Basis of Presentation THE ACCOMPANYING UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF BPC HOLDING CORPORATION AND ITS SUBSIDIARIES (THE "COMPANY") HAVE BEEN PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES FOR INTERIM FINANCIAL INFORMATION AND WITH THE INSTRUCTIONS FOR FORM 10-Q AND ARTICLE 10 OF REGULATION S-X. ACCORDINGLY, THEY DO NOT INCLUDE ALL OF THE INFORMATION AND FOOTNOTES REQUIRED BY GENERALLY ACCEPTED ACCOUNTING PRINCIPLES FOR COMPLETE FINANCIAL STATEMENTS. IN THE OPINION OF MANAGEMENT, ALL ADJUSTMENTS (CONSISTING OF NORMAL RECURRING ACCRUALS) CONSIDERED NECESSARY FOR A FAIR PRESENTATION HAVE BEEN INCLUDED. OPERATING RESULTS FOR THE PERIODS PRESENTED ARE NOT NECESSARILY INDICATIVE OF THE RESULTS THAT MAY BE EXPECTED FOR THE FULL FISCAL YEAR. THE ACCOMPANYING FINANCIAL STATEMENTS INCLUDE THE RESULTS OF BPC HOLDING CORPORATION ("HOLDING") AND ITS WHOLLY-OWNED SUBSIDIARY, BERRY PLASTICS CORPORATION ("BERRY"), AND ITS WHOLLY-OWNED SUBSIDIARIES: BERRY IOWA CORPORATION, BERRY TRI-PLAS CORPORATION, BERRY STERLING CORPORATION, AEROCON, INC., PACKERWARE CORPORATION, BERRY PLASTICS DESIGN CORPORATION, VENTURE PACKAGING, INC. AND ITS SUBSIDIARIES VENTURE PACKAGING MIDWEST, INC. AND BERRY PLASTICS TECHNICAL SERVICES, INC., NIM HOLDINGS LIMITED AND ITS SUBSIDIARY BERRY PLASTICS U.K. LIMITED AND ITS SUBSIDIARY NORWICH ACQUISITION LIMITED, KNIGHT PLASTICS, INC., CPI HOLDING CORPORATION AND ITS SUBSIDIARY CARDINAL PACKAGING, INC., BERRY PLASTICS ACQUISITION CORPORATION II, POLY-SEAL CORPORATION, BERRY PLASTICS ACQUISITION CORPORATION III, CBP HOLDINGS S.R.L. AND ITS SUBSIDIARIES CAPSOL BERRY PLASTICS S.P.A. AND OCIESSE S.R.L, AND PESCOR, INC.. FOR FURTHER INFORMATION, REFER TO THE CONSOLIDATED FINANCIAL STATEMENTS AND FOOTNOTES THERETO INCLUDED IN HOLDING'S AND BERRY'S FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE YEAR ENDED DECEMBER 30, 2000. CERTAIN AMOUNTS ON THE 2000 FINANCIAL STATEMENTS HAVE BEEN RECLASSIFIED TO CONFORM WITH THE 2001 PRESENTATION. 2. Acquisitions ON MAY 9, 2000, BERRY ACQUIRED ALL OF THE OUTSTANDING CAPITAL STOCK OF POLY-SEAL CORPORATION ("POLY-SEAL") FOR AGGREGATE CONSIDERATION OF APPROXIMATELY $58.0 MILLION. THE PURCHASE WAS FINANCED THROUGH THE ISSUANCE BY HOLDING OF $25.0 MILLION OF 14% PREFERRED STOCK AND WARRANTS AND ADDITIONAL BORROWINGS UNDER THE SENIOR CREDIT FACILITY. THE OPERATIONS OF POLY-SEAL ARE INCLUDED IN BERRY'S OPERATIONS SINCE THE ACQUISITION DATE USING THE PURCHASE METHOD OF ACCOUNTING. ON OCTOBER 4, 2000, BERRY, THROUGH ITS NEWLY-FORMED, WHOLLY OWNED ITALIAN SUBSIDIARY CBP HOLDINGS S.R.L. ("CAPSOL"), ACQUIRED ALL OF THE OUTSTANDING CAPITAL STOCK OF CAPSOL S.P.A., HEADQUARTERED IN CORNATE D'ADDA, NEAR MILAN, ITALY AND THE WHOLE QUOTA CAPITAL OF A RELATED COMPANY, OCIESSE S.R.L., FOR AGGREGATE CONSIDERATION OF APPROXIMATELY $14.0 MILLION. THE PURCHASE WAS FINANCED THROUGH BORROWINGS UNDER THE SENIOR CREDIT FACILITY. THE OPERATIONS OF CAPSOL ARE INCLUDED IN BERRY'S OPERATIONS SINCE THE ACQUISITION DATE USING THE PURCHASE METHOD OF ACCOUNTING. 8 THE FAIR VALUE OF THE NET ASSETS ACQUIRED WAS BASED ON PRELIMINARY ESTIMATES AND MAY BE REVISED AT A LATER DATE. ON MAY 14, 2001, BERRY ACQUIRED ALL OF THE OUTSTANDING CAPITAL STOCK OF PESCOR PLASTICS, INC. ("PESCOR") FOR AGGREGATE CONSIDERATION OF APPROXIMATELY $22.0 MILLION PLUS AN ADDITIONAL $3.0 MILLION IF CERTAIN FINANCIAL TARGETS ARE MET. THE PURCHASE WAS FINANCED THROUGH THE ISSUANCE BY HOLDING OF $10.0 MILLION OF 14% PREFERRED STOCK AND ADDITIONAL BORROWINGS UNDER THE SENIOR CREDIT FACILITY. THE OPERATIONS OF PESCOR ARE INCLUDED IN BERRY'S OPERATIONS SINCE THE ACQUISITION DATE USING THE PURCHASE METHOD OF ACCOUNTING. THE FAIR VALUE OF THE NET ASSETS ACQUIRED WAS BASED ON PRELIMINARY ESTIMATES AND MAY BE REVISED AT A LATER DATE. THE PRO FORMA RESULTS LISTED BELOW ARE UNAUDITED AND REFLECT PURCHASE ACCOUNTING ADJUSTMENTS ASSUMING THE POLY-SEAL, CAPSOL, AND PESCOR ACQUISITIONS OCCURRED ON JANUARY 2, 2000.
Thirteen Weeks Ended Thirty-nine Weeks Ended ------------------------------------------------------------- SEPTEMBER 29, SEPTEMBER 30, SEPTEMBER 29, SEPTEMBER 30, 2001 2000 2001 2000 ------------------------------------------------------------- Pro forma net sales $ 121,909 $ 115,709 $375,376 $ 356,515 Pro forma net income (loss) 230 (5,158) 2,592 (21,272)
The pro forma financial information is presented for informational purposes only and is not necessarily indicative of the operating results that would have occurred had the acquisitions been consummated at the above date, nor are they necessarily indicative of future operating results. Further, the information gathered on the acquired companies is based upon unaudited internal financial information and reflects only pro forma adjustments for additional interest expense and amortization of the excess of the cost over the underlying net assets acquired, net of the applicable income tax effects. 3. LONG-TERM DEBT Long-term debt consists of the following:
SEPTEMBER 29, DECEMBER 30, 2001 2000 -------------- -------------- Holding 12.50% Senior Secured Notes $135,714 $127,282 Berry 12.25% Senior Subordinated Notes 125,000 125,000 Berry 11% Senior Subordinated Notes 75,000 75,000 Term loans 60,398 75,607 Revolving lines of credit 33,432 35,447 Second Lien Senior Facility 25,000 25,000 Capital leases 16,141 1,435 Nevada Industrial Revenue Bonds 3,000 3,500 Debt premium, net 422 535 -------- -------- 474,107 468,806 Less current portion of long-term debt 23,411 23,232 -------- -------- $450,696 $445,574 ======== ========
9 The current portion of long-term debt consists of $20.8 million on the term loans payable in monthly installments and $2.6 million in repayments of the industrial bonds and the monthly principal payments related to capital lease obligations. The Company has a financing and security agreement (the "Financing Agreement") with a syndicate of lenders led by Bank of America for a senior secured credit facility (the "Credit Facility"). As of September 29, 2001, the Credit Facility provides the Company with (i) a $80.0 million revolving line of credit ("US Revolver"), subject to a borrowing base formula, (ii) a $2.2 million (using the September 29, 2001 exchange rate) revolving line of credit denominated in British Sterling in the U.K. ("UK Revolver"), subject to a separate borrowing base formula, (iii) a $58.0 million term loan facility, (iv) a $2.4 million (using the September 29, 2001 exchange rate) term loan facility denominated in British Sterling in the U.K. ("UK Term Loan"), and (v) a $3.2 million standby letter of credit facility to support the Company's and its subsidiaries' obligations under the Nevada Bonds. CBP Holdings S.r.l. has a revolving credit facility (the "Italy Revolver") from Bank of America for $12.3 million (using the September 29, 2001 exchange rate) denominated in Euros. Bank of America also extends working capital financing (the "Italy Working Capital Line") of up to $1.6 million (using the September 29, 2001 exchange rate) denominated in Euros. The full amount available under the Italy Revolver and the Italy Working Capital Line are applied to reduce amounts available under the US Revolver, as does the outstanding balance under the UK Revolver. At September 29, 2001, the Company had unused borrowing capacity under the Credit Facility's revolving line of credit of approximately $37.2 million. The indebtedness under the Credit Facility is guaranteed by Holding and all of its subsidiaries (other than its subsidiaries in the United Kingdom and Italy). The obligations of the Company and the subsidiaries under the Credit Facility and the guarantees thereof are secured by substantially all of the assets of such entities. 4. CHANGES IN STOCKHOLDERS' EQUITY In connection with the Pescor acquisition on May 14, 2001, Holding issued 13,168 shares of Series C Preferred Stock, as defined below, to certain selling shareholders of Pescor. The Series C Preferred Stock is comprised of 3,063 shares of Series C-1 Preferred Stock, 1,910 shares of Series C-2 Preferred Stock, 2,135 shares of Series C-3 Preferred Stock, 3,033 shares of Series C-4 Preferred Stock, and 3,027 shares of Series C-5 Preferred Stock. The Series C Preferred Stock has stated values ranging from $653 per share to $1,047 per share, and dividends accrue at a rate of 14% per annum and will accumulate until declared and paid. The Series C Preferred Stock ranks junior to the other preferred stock of Holding and prior to all other capital stock of Holding. In addition, the holders of the Series C Preferred have options beginning on December 31, 2001 to convert the Series C Preferred Stock to Series D Preferred Stock and Class B Nonvoting Common Stock. 10 5. CONDENSED CONSOLIDATING FINANCIAL INFORMATION Holding conducts its business through its wholly owned subsidiary, Berry. Holding and all of Berry's subsidiaries fully, jointly, severally, and unconditionally guarantee on a senior subordinated basis the $100.0 million aggregate principal amount of 12.25% Berry Plastics Corporation Senior Subordinated Notes due 2004 issued on April 21, 1994 (the "1994 Notes"), the $25.0 million aggregate principal amount of 12.25% Berry Plastics Corporation Series B Senior Subordinated Notes due 2004 issued on August 24, 1998 (the "1998 Notes"), and the $75.0 million aggregate principal amount of 11% Berry Plastics Corporation Senior Subordinated Notes due 2007 issued on July 6, 1999 (the "1999 Notes"). There are no nonguarantor subsidiaries with respect to the notes issued by Berry. Holding's 12.50% Series B Senior Secured Notes due 2006 (the "1996 Notes") are not guaranteed by Berry or any of Berry's wholly owned subsidiaries. The Indenture dated as of April 21, 1994 (the "1994 Indenture"), the Indenture dated August 24, 1998 (the "1998 Indenture") and the Indenture dated July 6, 1999 (the "1999 Indenture") restrict, and the Credit Facility prohibits, Berry's ability to pay any dividend or make any distribution of funds to Holding to satisfy interest and other obligations on Holding's 1996 Notes. Berry and all of Berry's subsidiaries are 100% owned by Holding. Separate narrative information or financial statements of guarantor subsidiaries have not been included as management believes they would not be material to investors. Presented below is condensed consolidating financial information for Holding, Berry, and its subsidiaries at September 29, 2001 and December 30, 2000 and for the thirteen and thirty-nine weeks ended September 29, 2001 and September 30, 2000. The equity method has been used with respect to investments in subsidiaries.
SEPTEMBER 29, 2001 -------------------------------------------------------------------------- BPC Holding Berry Plastics Combined Corporation Corporation Guarantor Consolidating (Parent) (Issuer) Subsidiaries Adjustments Consolidated -------------------------------------------------------------------------- CONSOLIDATING BALANCE SHEET Current assets $ 437 $ 36,591 $ 84,860 $ - $ 121,888 Net property and equipment - 76,363 126,997 - 203,360 Other noncurrent assets 33,318 328,788 121,643 (348,517) 135,232 -------- -------- -------- -------- -------- Total assets $33,755 $ 441,742 $ 333,500 $ (348,517) $ 460,480 ======== ======== ======== ======== ======== Current liabilities $ 4,927 $ 62,675 $ 44,294 $ - $ 111,896 Noncurrent liabilities 160,465 348,006 336,968 (365,218) 480,221 Equity (deficit) (131,637) 31,061 (47,762) 16,701 (131,637) -------- -------- -------- -------- -------- Total liabilities and equity (deficit) $33,755 $ 441,742 $ 333,500 $ (348,517) $ 460,480 ======== ======== ======== ======== ========
THIRTEEN WEEKS ENDED SEPTEMBER 29, 2001 -------------------------------------------------------------------------- BPC Holding Berry Plastics Combined Corporation Corporation Guarantor Consolidating (Parent) (Issuer) Subsidiaries Adjustments Consolidated -------------------------------------------------------------------------- CONSOLIDATING STATEMENT OF OPERATIONS Net sales $ - $ 41,641 $ 80,269 $ - $ 121,910 Cost of goods sold - 27,280 64,031 - 91,311 -------- -------- -------- -------- -------- Gross profit - 14,361 16,238 - 30,599 Operating expenses 190 5,728 10,497 - 16,415 -------- -------- -------- -------- -------- Operating income (loss) (190) 8,633 5,741 - 14,184 Other expenses (income) - 59 374 - 433 Interest expense 4,352 1,218 7,921 - 13,491 Income taxes 4 8 72 - 84 Equity in net(income)loss from subsidiary (4,722) 2,626 - 2,096 - -------- -------- -------- -------- -------- Net income (loss) $ 176 $ 4,722 $ (2,626) $ (2,096) $ 176 ======== ======== ======== ======== ========
11
THIRTY-NINE WEEKS ENDED SEPTEMBER 29, 2001 -------------------------------------------------------------------------- BPC Holding Berry Plastics Combined Corporation Corporation Guarantor Consolidating (Parent) (Issuer) Subsidiaries Adjustments Consolidated -------------------------------------------------------------------------- CONSOLIDATING STATEMENT OF OPERATIONS Net sales $ - $ 125,539 $ 237,384 $ - $ 362,923 Cost of goods sold - 81,927 182,403 - 264,330 -------- -------- -------- -------- -------- Gross profit - 43,612 54,981 - 98,593 Operating expenses 554 18,964 33,891 - 53,409 -------- -------- -------- -------- -------- Operating income (loss) (554) 24,648 21,090 - 45,184 Other expenses (income) - 41 348 - 389 Interest expense 13,084 6,033 22,357 - 41,474 Income taxes 20 26 169 - 215 Equity in net (income) loss from subsidiary (16,764) 1,784 - 14,980 - -------- -------- -------- -------- -------- Net income (loss) $ 3,106 $ 16,764 $ (1,784) $ (14,980) $ 3,106 ======== ======== ======== ======== ========
CONSOLIDATING STATEMENT OF CASH FLOWS Net income (loss) $ 3,106 $ 16,764 $ (1,784) $ (14,980) $ 3,106 Non-cash expenses 13,523 11,263 28,050 - 52,836 Equity in net (income) loss from subsidiary (16,764) 1,784 - 14,980 - Changes in working capital - 6,022 (4,627) - 1,395 -------- -------- -------- -------- -------- Net cash provided by (used for) operating activities (135) 35,833 21,639 - 57,337 Net cash used for investing activities - (33,759) (13,601) - (47,360) Net cash provided by (used for) financing activities 352 (1,706) (7,834) - (9,188) Effect on exchange rate changes on cash - - 449 - 449 -------- -------- -------- -------- -------- Net increase in cash and cash 217 368 653 - 1,238 equivalents Cash and cash equivalents at beginning of period 220 642 1,192 - 2,054 -------- -------- -------- -------- -------- Cash and cash equivalents at end of period $ 437 $ 1,010 $ 1,845 $ - $ 3,292 ======== ======== ======== ======== ========
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DECEMBER 30, 2000 -------------------------------------------------------------------------- BPC Holding Berry Plastics Combined Corporation Corporation Guarantor Consolidating (Parent) (Issuer) Subsidiaries Adjustments Consolidated -------------------------------------------------------------------------- CONSOLIDATING BALANCE SHEET Current assets $ 220 $ 32,290 $ 72,192 $ - $ 104,702 Net property and equipment - 55,221 124,583 - 179,804 Other noncurrent assets 8,226 267,840 113,455 (260,905) 128,616 -------- -------- -------- -------- -------- Total assets $ 8,446 $ 355,351 $310,230 $(260,905) $ 413,122 ======== ======== ======== ======== ======== Current liabilities $ 661 $ 50,968 $ 32,603 $ - $ 84,232 Noncurrent liabilities 144,938 299,694 312,691 (290,436) 466,887 Equity (deficit) (137,153) 4,689 (35,064) 29,531 (137,997) -------- -------- -------- -------- -------- Total liabilities and equity (deficit) $ 8,446 $ 355,351 $310,230 $(260,905) $ 413,122 ======== ======== ======== ======== ========
THIRTEEN WEEKS ENDED SEPTEMBER 30, 2000 -------------------------------------------------------------------------- BPC Holding Berry Plastics Combined Corporation Corporation Guarantor Consolidating (Parent) (Issuer) Subsidiaries Adjustments Consolidated -------------------------------------------------------------------------- CONSOLIDATING STATEMENT OF OPERATIONS Net sales $ - $ 39,437 $ 66,208 $ - $ 105,645 Cost of goods sold - 27,267 53,336 - 80,603 -------- -------- -------- -------- -------- Gross profit - 12,170 12,872 - 25,042 Operating expenses 71 6,052 9,481 - 15,604 -------- -------- -------- -------- -------- Operating income (loss) (71) 6,118 3,391 - 9,438 Other expenses (income) - 8 (70) - (62) Interest expense 4,074 3,278 6,095 - 13,447 Income taxes 4 10 16 - 30 Equity in net(income)loss from subsidiary (172) 2,650 - (2,478) - -------- -------- -------- -------- -------- Net income (loss) $ (3,977) $ 172 $ (2,650) $ (2,478) $ (3,977) ======== ======== ======== ======== ========
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THIRTY-NINE WEEKS ENDED SEPTEMBER 30, 2000 -------------------------------------------------------------------------- BPC Holding Berry Plastics Combined Corporation Corporation Guarantor Consolidating (Parent) (Issuer) Subsidiaries Adjustments Consolidated -------------------------------------------------------------------------- CONSOLIDATING STATEMENT OF OPERATIONS Net sales $ - $ 122,324 $ 187,690 $ - $310,014 Cost of goods sold - 84,154 153,354 - 237,508 -------- -------- -------- -------- -------- Gross profit - 38,170 34,336 - 72,506 Operating expenses 238 18,901 30,223 - 49,362 -------- -------- -------- -------- -------- Operating income (loss) (238) 19,269 4,113 - 23,144 Other expenses - 259 294 - 553 Interest expense 11,722 10,057 15,661 - 37,440 Income taxes 14 20 21 - 55 Extraordinary item - 1,022 - - 1,022 Equity in net(income)loss from subsidiary 3,952 11,863 - (15,815) - -------- -------- -------- -------- -------- Net income (loss) $ (15,926) $ (3,952) $ (11,863) $ 15,815 $(15,926) ======== ======== ======== ======== ========
CONSOLIDATING STATEMENT OF CASH FLOWS Net income (loss) $ (15,926) $ (3,952) $ (11,863) $ 15,815 $(15,926) Non-cash expenses 11,707 9,958 23,269 - 44,934 Equity in net (income) loss from subsidiary 3,952 11,863 - (15,815) - Changes in working capital - 1,259 (10,664) - (9,405) -------- -------- -------- -------- -------- Net cash provided by (used for) operating activities (267) 19,128 742 - 19,603 Net cash used for investing activities - (73,977) (12,836) - (86,813) Net cash provided by (used for) financing activities (112) 60,709 13,609 - 74,206 Effect on exchange rate changes on cash - - 250 - 250 -------- -------- -------- -------- -------- Net increase (decrease) in cash and cash equivalents (379) 5,860 1,765 - 7,246 Cash and cash equivalents at beginning of period 703 976 867 - 2,546 -------- -------- -------- -------- -------- Cash and cash equivalents at end of period $ 324 $ 6,836 $ 2,632 $ - $ 9,792 ======== ======== ======== ======== ========
14 6. OPERATING SEGMENTS The Company has three reportable segments: containers, closures, and consumer products. The Company evaluates performance and allocates resources based on operating income before depreciation and amortization of intangibles adjusted to exclude (i) stock option accounting, (ii) other non-recurring or "one-time" expenses and (iii) management fees and reimbursed expenses paid to First Atlantic ("Adjusted EBITDA"). The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies.
Thirteen Weeks Ended Thirty-nine Weeks Ended -------------------------------------------------------------- SEPTEMBER 29, SEPTEMBER 30, SEPTEMBER 29, SEPTEMBER 30, 2001 2000 2001 2000 -------------------------------------------------------------- Net sales: Containers $ 61,481 $ 59,038 $ 184,427 $ 177,892 Closures 34,094 31,935 102,483 79,316 Consumer Products 26,335 14,675 76,013 52,807 Adjusted EBITDA: Containers 16,568 12,549 50,345 34,681 Closures 7,452 6,997 21,799 16,786 Consumer Products 4,275 2,202 14,372 7,741 Total assets: Containers 213,257 214,922 213,257 214,922 Closures 162,162 150,490 162,162 150,490 Consumer Products 85,061 47,710 85,061 47,710 Reconciliation of Adjusted EBITDA to income (loss) before income taxes: Adjusted EBITDA for reportable Segments $ 28,295 $ 21,748 $ 86,516 $ 59,208 Net interest expense (13,491) (13,447) (41,474) (37,440) Depreciation (9,714) (8,356) (27,756) (22,743) Amortization (3,290) (3,025) (9,386) (7,503) Gain (loss) on disposal of property and equipment (433) 62 (389) (553) One-time expenses (745) (711) (3,103) (5,060) Stock option accounting (150) - (450) (104) Management fees (212) (218) (637) (654) -------- -------- -------- -------- Income (loss) before income taxes and extraordinary item $ 260 $ (3,947) $ 3,321 $(14,849) ======== ======== ======== ========
One-time expenses represent non-recurring expenses that relate to recently acquired businesses and plant consolidations. 7. COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss) was $0.9 million and ($4.1 million) for the thirteen weeks ended September 29, 2001 and September 30, 2000, respectively and $2.7 million and ($16.5 million) for the thirty-nine weeks ended September 29, 2001 and September 30, 2000, respectively. 15 8. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT On June 29, 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS ("SFAS No. 142"). SFAS No. 142 addresses accounting and reporting of acquired goodwill and other intangible assets and must be adopted by the Company on January 1, 2002. In addition, the goodwill impairment testing provisions of SFAS No. 142 must be applied to any goodwill or other intangible assets that are recognized in the Company's financial statements at the time of adoption. Upon adoption, goodwill will no longer be amortized and will be tested for impairment at least annually. Any goodwill or other intangible asset impairment losses recognized from the initial impairment test are required to be reported as a cumulative effect of a change in accounting principle in the Company's financial statements. The Company is currently assessing the impact that SFAS No. 142 will have on its financial statements upon adoption in the first quarter of 2002. 16 ITEM 2. BPC HOLDING CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS UNLESS THE CONTEXT DISCLOSES OTHERWISE, THE "COMPANY" AS USED IN THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SHALL INCLUDE HOLDING AND ITS SUBSIDIARIES ON A CONSOLIDATED BASIS. THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL STATEMENTS OF HOLDING AND ITS SUBSIDIARIES AND THE ACCOMPANYING NOTES THERETO, WHICH INFORMATION IS INCLUDED ELSEWHERE HEREIN. THE COMPANY IS HIGHLY LEVERAGED. THE HIGH DEGREE OF LEVERAGE COULD HAVE IMPORTANT CONSEQUENCES, INCLUDING, BUT NOT LIMITED TO, THE FOLLOWING: (I) A SUBSTANTIAL PORTION OF BERRY'S CASH FLOW FROM OPERATIONS MUST BE DEDICATED TO THE PAYMENT OF PRINCIPAL AND INTEREST ON ITS INDEBTEDNESS, THEREBY REDUCING THE FUNDS AVAILABLE TO BERRY FOR OTHER PURPOSES; (II) BERRY'S ABILITY TO OBTAIN ADDITIONAL DEBT FINANCING IN THE FUTURE FOR WORKING CAPITAL, CAPITAL EXPENDITURES, ACQUISITIONS, GENERAL CORPORATE PURPOSES OR OTHER PURPOSES MAY BE IMPAIRED; (III) CERTAIN OF BERRY'S BORROWINGS WILL BE AT VARIABLE RATES OF INTEREST, WHICH WILL EXPOSE BERRY TO THE RISK OF HIGHER INTEREST RATES; (IV) THE INDEBTEDNESS OUTSTANDING UNDER THE SENIOR CREDIT FACILITY IS SECURED BY SUBSTANTIALLY ALL OF THE ASSETS OF BERRY; (V) BERRY IS SUBSTANTIALLY MORE LEVERAGED THAN CERTAIN OF ITS COMPETITORS, WHICH MAY PLACE BERRY AT A COMPETITIVE DISADVANTAGE, PARTICULARLY IN LIGHT OF ITS ACQUISITION STRATEGY; AND (VI) BERRY'S DEGREE OF LEVERAGE MAY HINDER ITS ABILITY TO ADJUST RAPIDLY TO CHANGING MARKET CONDITIONS AND COULD MAKE IT MORE VULNERABLE IN THE EVENT OF A DOWNTURN IN GENERAL ECONOMIC CONDITIONS OR ITS BUSINESS. RESULTS OF OPERATIONS 13 Weeks Ended September 29, 2001 ("Quarter") Compared to 13 Weeks Ended September 30, 2000 ("Prior Quarter") NET SALES. Net sales increased $16.3 million, or 15%, to $121.9 million for the Quarter from $105.6 million for the Prior Quarter with an approximate 1% increase in net selling price. Container net sales increased $2.5 million from the Prior Quarter due primarily to a large promotion and increased selling prices. Closure net sales increased $2.2 million with the acquisition of Capsol representing $2.4 million of the increase. Consumer product sales for the Quarter were $11.7 million more than the Prior Quarter with the Pescor acquisition providing approximately $10.5 million of sales in the Quarter. GROSS PROFIT. Gross profit increased by $5.6 million to $30.6 million (25% of net sales) for the Quarter from $25.0 million (24% of net sales) for the Prior Quarter. This increase of 23% includes the combined impact of the added Capsol and Pescor sales volume, the effect of net selling prices and raw material costs, acquisition integration and productivity improvement initiatives. The 1% increase in net selling price was primarily the result of partially recovering raw material cost increases incurred in 2000. In addition, the Company has continued to consolidate products and business of recent acquisitions to the most efficient tooling, providing customers with improved products and customer service. As part of the integration, the Company closed its York, Pennsylvania facility and removed remaining production from its Minneapolis, Minnesota facility (acquired in the Cardinal Acquisition) in the fourth quarter of 2000. The business from 17 these locations was distributed throughout Berry's facilities. Also, significant productivity improvements were made during the year, including the addition of state-of-the-art injection molding equipment, molds and printing equipment at several of the Company's facilities. Additional significant cost reductions have been achieved through the Company's realignment in the third quarter of 2000 from a functional based organization to a divisional structure. This realignment has enabled the Company to reduce personnel costs and improve employee productivity. OPERATING EXPENSES. Selling expenses decreased by $0.2 million to $5.6 million for the Quarter from $5.8 million for the Prior Quarter principally as a result of savings from the organizational realignment in the third quarter of 2000 partially offset by the Capsol and Pescor acquisitions. General and administrative expenses increased from $5.5 million for the Prior Quarter to $6.3 million for the Quarter. This increase of $0.8 million is primarily attributable to the Capsol and Pescor acquisitions and increased accrued bonus expenses with improved operating performance partially offset by savings from the organizational realignment in the third quarter of 2000. During the Quarter, one-time transition expenses were $0.3 million related to acquisitions and $0.4 million related to the shutdown and reorganization of facilities. In the Prior Quarter, one-time transition expenses related to acquisitions were $0.6 million. INTEREST EXPENSE, NET. Net interest expense increased by $0.1 million for the Quarter at $13.5 million compared to $13.4 million for the Prior Quarter primarily due to borrowings under the senior credit facility to support the Capsol and Pescor acquisitions partially offset by lower interest rates. INCOME TAX. For the Quarter, the Company recorded income tax expense of $84,000 compared to income tax expense of $30,000 for the Prior Quarter. The Company continues to operate in a net operating loss carryforward position for federal income tax purposes. NET INCOME (LOSS). The Company recorded net income of $0.2 million for the Quarter compared to a net loss of $4.0 million for the Prior Quarter for the reasons discussed above. 39 Weeks Ended September 29, 2001 ("YTD") Compared to 39 Weeks Ended September 30, 2000 ("Prior YTD") NET SALES. Net sales increased $52.9 million, or 17%, to $362.9 million for the YTD from $310.0 million for the Prior YTD with an approximate 2% increase in net selling price. Container net sales increased $6.5 million from the Prior YTD due primarily to increased selling prices and a large promotion. Closure net sales increased $23.2 million with the Poly-Seal and Capsol acquisitions representing approximately $25.4 million of the increase in the YTD, partially offset by a general slow down in the market. Consumer product sales for the YTD were $23.2 million more than the Prior YTD as the Pescor acquisition contributed approximately $17.7 million of net sales in the YTD and continued strong demand in the retail housewares market. GROSS PROFIT. Gross profit increased by $26.1 million to $98.6 million (27% of net sales) for the YTD from $72.5 million (23% of net sales) for the Prior YTD. This increase of 36% includes the combined impact of the added Poly-Seal, Capsol, and Pescor sales volume, the effect of net selling prices and raw material costs, acquisition integration and productivity improvement initiatives. The 2% increase in net selling price was primarily the result of partially recovering raw material cost increases 18 incurred in 2000. In addition, the Company has continued to consolidate products and business of recent acquisitions to the most efficient tooling, providing customers with improved products and customer service. As part of the integration, the Company closed its York, Pennsylvania facility and removed remaining production from its Minneapolis, Minnesota facility (acquired in the Cardinal Acquisition) in the fourth YTD of 2000. The business from these locations was distributed throughout Berry's facilities. Also, significant productivity improvements were made during the year, including the addition of state-of-the-art injection molding equipment, molds and printing equipment at several of the Company's facilities. Additional significant cost reductions have been achieved through the Company's realignment in the third YTD of 2000 from a functional based organization to a divisional structure. This realignment has enabled the Company to reduce personnel costs and improve employee productivity. OPERATING EXPENSES. Selling expenses increased by $0.4 million to $17.0 million for the YTD from $16.6 million for the Prior YTD principally as a result of the Poly-Seal, Capsol, and Pescor acquisitions, partially offset by savings from the organizational realignment in the third quarter of 2000. General and administrative expenses increased from $18.2 million for the Prior YTD to $22.6 million for the YTD. This increase of $4.4 million is primarily attributable to the Poly-Seal, Capsol, and Pescor acquisitions partially offset by savings from the organizational realignment in the third quarter of 2000. During the YTD, one-time transition expenses were $1.4 million related to acquisitions and $1.6 million related to the shutdown and reorganization of facilities. In the Prior YTD, one-time transition expenses related to acquisitions were $1.2 million and $3.7 million related to the shutdown and reorganization of facilities. INTEREST EXPENSE, NET. Net interest expense increased $4.0 million to $41.5 million for the YTD compared to $37.5 million for the Prior YTD primarily due to borrowings under the senior credit facility to support the Poly-Seal, Capsol and Pescor acquisitions. INCOME TAX. For the YTD, the Company recorded income tax expense of $215,000 compared to income tax expense of $55,000 for the Prior YTD. The Company continues to operate in a net operating loss carryforward position for federal income tax purposes. NET INCOME (LOSS). The Company recorded net income of $3.1 million for the YTD compared to a net loss of $15.9 million for the Prior YTD for the reasons discussed above. LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities was $57.3 million for the YTD compared to $19.6 million for the Prior YTD. The increase is primarily the result of improved operating performance with net income before depreciation and amortization increasing $25.9 million from the Prior YTD. Net cash used for investing activities decreased from $86.8 million for the Prior YTD to $47.4 million for the YTD primarily as a result of the Poly- Seal acquisition in the Prior YTD. YTD capital spending of $23.9 million included $2.8 million for buildings and systems, $10.6 million for molds, $7.0 million for molding and printing machines, and $3.5 million for accessory equipment and systems. 19 Net cash used for financing activities was $9.2 million for the YTD compared to net cash provided by financing activities of $74.2 million for the Prior YTD. The decrease of $83.3 million can be attributed to decreased borrowings under the Credit Facility's revolving line of credit as net cash provided by operating activities has increased $37.7 million from the Prior YTD and reduced investing activities as noted above. On May 14, 2001, in connection with the Pescor acquisition, the Company entered into an amendment of each of the Credit Facility and the Second Lien Senior Facility. Under the amendment to the Credit Facility, the commitments under the Revolving Credit Facility were increased from $70.0 million to $80.0 million and an additional term loan facility was created for borrowings up to $2.0 million. The amendments to both agreements modified a number of covenants and other provisions of both agreements, including financial covenants and negative covenants relating to indebtedness, investments and distributions from the Company to Holding. In addition, the amendments extended the maturity date of both the Credit Facility and the Senior Lien Senior Facility to January 21, 2004, and increased the interest margins on the loans under both facilities by 0.25%. The Company paid fees of approximately $0.8 million in connection with the acquisition financing, extension of the maturity date, and the covenant amendments. Increased working capital needs occur whenever the Company experiences strong incremental demand or a significant rise in the cost of raw material, particularly plastic resin. The Company anticipates that its cash interest, working capital and capital expenditure requirements for 2001 will be satisfied through a combination of funds generated from operating activities and cash on hand, together with funds available under the Credit Facility. Management bases such belief on historical experience and the substantial funds available under the Credit Facility. However, the Company cannot predict its future results of operations. At September 29, 2001, the Company's cash balance was $3.3 million, and Berry had unused borrowing capacity under the Credit Facility's borrowing base of approximately $37.2 million. THE 1994 INDENTURE, 1998 INDENTURE, AND 1999 INDENTURE RESTRICT, AND THE CREDIT FACILITY PROHIBITS, BERRY'S ABILITY TO PAY ANY DIVIDEND OR MAKE ANY DISTRIBUTION OF FUNDS TO HOLDING TO SATISFY INTEREST AND OTHER OBLIGATIONS ON THE 1996 NOTES. INTEREST ON THE 1996 NOTES IS PAYABLE SEMI-ANNUALLY ON JUNE 15 AND DECEMBER 15 OF EACH YEAR. HOWEVER, FROM DECEMBER 15, 1999 UNTIL JUNE 15, 2001, HOLDING, AT ITS OPTION, PAID INTEREST, AT AN INCREASED RATE OF 0.75% PER ANNUM, IN ADDITIONAL 1996 NOTES VALUED AT 100% OF THE PRINCIPAL AMOUNT THEREOF. HOLDING HAS ISSUED AN ADDITIONAL APPROXIMATELY $30.7 MILLION AGGREGATE PRINCIPAL AMOUNT OF 1996 NOTES IN SATISFACTION OF ITS INTEREST OBLIGATION. HOLDING'S ABILITY TO PAY PRINCIPAL AND INTEREST IN CASH ON THE 1996 NOTES AND BERRY'S ABILITY TO PAY PRINCIPAL AND INTEREST ON THE 1994 NOTES, 1998 NOTES, AND 1999 NOTES WILL DEPEND ON BERRY'S FINANCIAL AND OPERATING PERFORMANCE, WHICH IN TURN ARE SUBJECT TO PREVAILING ECONOMIC CONDITIONS AND TO CERTAIN FINANCIAL, BUSINESS AND OTHER FACTORS BEYOND ITS CONTROL. BASED ON HISTORICAL OPERATING RESULTS, MANAGEMENT BELIEVES THAT SUFFICIENT MONIES ARE AVAILABLE FROM BERRY UNDER A TAX SHARING AGREEMENT TO ENABLE HOLDING TO MAKE THE DECEMBER 2001 CASH INTEREST PAYMENT ON THE 1996 NOTES, WHICH PAYMENT IS SUBJECT TO THERE BEING NO DEFAULT OR EVENT OF DEFAULT AT THE TIME UNDER THE CREDIT FACILITY. HOWEVER, IF BERRY CANNOT GENERATE SUFFICIENT CASH FLOW FROM OPERATIONS TO MEET ITS OBLIGATIONS, THEN THE COMPANY MAY BE FORCED TO TAKE ACTIONS SUCH AS REDUCING OR DELAYING CAPITAL EXPENDITURES, SELLING ASSETS, RESTRUCTURING OR REFINANCING ITS INDEBTEDNESS, OR SEEKING ADDITIONAL EQUITY CAPITAL. THERE IS NO ASSURANCE THAT ANY OF THESE ACTIONS COULD BE EFFECTED ON SATISFACTORY TERMS, IF AT ALL. 20 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 1. Exhibits: NONE 2. Reports on 8-K: NONE 21 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BPC Holding Corporation Berry Plastics Corporation November 9, 2001 By: /S/ JAMES M. KRATOCHVIL James M. Kratochvil Executive Vice President, Chief Financial Officer, Treasurer and Secretary of the entities listed above (Principal Financial and Accounting Officer) 22 -----END PRIVACY-ENHANCED MESSAGE-----