10-K 1 plask01.txt 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended DECEMBER 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 35-1813706 (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 35-1814673 (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 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrants: (1) have 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 such shorter period that the registrant was required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K: Not applicable. None of the voting stock of either registrant is held by a non-affiliate of such registrant. There is no public trading market for any class of voting stock of BPC Holding Corporation or Berry Plastics Corporation. As of March 15, 2002, 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 March 15, 2002, there were outstanding 100 shares of the Common Stock, $.01 par value, of Berry Plastics Corporation. DOCUMENTS INCORPORATED BY REFERENCE None -1- DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS THIS FORM 10-K 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-K 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-K, INCLUDING, WITHOUT LIMITATION, THE INFORMATION SET FORTH UNDER "BUSINESS" AND "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-K FOR THE FISCAL YEAR ENDED DECEMBER 29, 2001 TABLE OF CONTENTS PAGE PART I Item 1. Business.................................................... 4 Item 2. Properties.................................................. 11 Item 3. Legal Proceedings.......................................... 12 Item 4. Submission of Matters to a Vote of Security Holders........ 12 PART II Item 5. Market for Registrants' Common Equity and Related Stockholder Matters................................................... 13 Item 6. Selected Financial Data................................... 14 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................................. 15 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 20 Item 8. Financial Statements and Supplementary Data............... 21 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....................... 21 PART III Item 10. Directors and Executive Officers of the Registrants....... 22 Item 11. Executive Compensation.................................... 24 Item 12. Security Ownership of Certain Beneficial Owners and Management 27 Item 13. Certain Relationships and Related Transactions............ 28 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............................................... 31 -3- PART I ITEM 1. BUSINESS GENERAL BPC Holding Corporation ("Holding"), is the parent of Berry Plastics Corporation ("Berry" or the "Company"), a leading manufacturer and supplier of rigid plastic packaging products focused on five markets: open(top containers, aerosol overcaps, closures, drink cups and housewares. In order to support these five markets, the Company is organized into three divisions: containers, closures, and consumer products. Within each of its markets, the Company concentrates on manufacturing higher quality value-added products sold to marketers of image-conscious industrial and consumer products that utilize the Company's proprietary molds, superior color matching capabilities and sophisticated multi-color printing capabilities. The Company supplies overcaps and closures to a wide variety of customers and for a wide variety of commercial and consumer products. Similarly, the Company's open-top containers are used for packaging a broad spectrum of commercial and consumer products. The Company's drink cups are sold to fast food and family-dining restaurants, convenience stores, stadiums, and retail stores. The Company also sells primarily seasonal, semi-disposable housewares and lawn and garden products such as plates, bowls, pitchers and flower pots, to major retail marketers. Berry's customer base is comprised of over 12,000 customers with operations in a widely diversified range of markets. The Company's top ten customers accounted for approximately 20% of fiscal 2001 net sales, with no customer accounting for more than 5% of the Company's net sales in fiscal 2001. The historical allocation of the Company's total net sales among its product categories is as follows:
FISCAL --------------------------------------- 2001 2000 1999 --------- --------- ---------- Containers 51% 57% 57% Closures 28 27 25 Consumer 21 16 18 Products
The Company believes that it derives a strong competitive position from its state-of-the-art production capabilities, extensive array of proprietary molds in a wide variety of sizes and styles and dedication to service and quality. In the closure division, the Company distinguishes itself with superior color matching capabilities, which is of extreme importance to its base of image-conscious consumer products customers, and proprietary packing equipment, which enables the Company to deliver a higher quality product while lowering warehousing and shipping costs. In the container and drink cup markets, an in-house graphic arts department and sophisticated printing and decorating capabilities permit the Company to offer extensive value-added decorating options. The Company believes that it is an industry innovator, particularly in the area of decoration. These market-related strengths, combined with the Company's modern proprietary mold technology, high speed molding capabilities and multiple-plant locations, all contribute to the Company's strong market position. In addition to these marketing and manufacturing strengths, the Company believes that its close working relationships with customers are crucial to maintaining market positions and developing future growth opportunities. The Company employs a direct sales force that is focused on working with customers and the Company's production and product design personnel to develop customized packaging that enhances customer product differentiation and improves product performance. The Company works to develop innovative new products and identify and pursue non-traditional markets that can use existing Company products. -4- HISTORY Imperial Plastics, the Company's predecessor, was established in 1967 in Evansville, Indiana. Berry Plastics, Inc. ("Old Berry") was formed in 1983 to purchase substantially all of the assets of Imperial Plastics. In 1988, Old Berry acquired Gilbert Plastics of New Brunswick, New Jersey, a leading manufacturer of aerosol overcaps, and subsequently relocated Gilbert Plastics' production to Old Berry's Evansville, Indiana facility. In 1990, the Company and Holding, the holder of 100% of the outstanding capital stock of the Company, were formed to purchase the assets of Old Berry. In February 1992, the Company acquired substantially all of the assets of the Mammoth Containers division of Genpak Corporation. In March 1995, Berry Sterling Corporation ("Berry Sterling"), a newly formed wholly owned subsidiary of the Company, acquired substantially all of the assets of Sterling Products, Inc., a producer of injection molded plastic drink cups and lids. Management believes that the acquisition gave the Company immediate penetration into a rapidly expanding plastic drink cup market. In December 1995, Berry Tri-Plas Corporation ("Berry Tri- Plas"), a wholly owned subsidiary of the Company, acquired substantially all of the assets of Tri-Plas, Inc., a manufacturer of injection molded containers and lids. Management believes that the acquisition gave the Company an immediate presence in the polypropylene container product line, which is mainly used for food and "hot fill" applications. In January 1997, the Company acquired certain assets of Container Industries, Inc. ("Container Industries"), a manufacturer and marketer of injection molded industrial and pry-off containers for building products and other industrial markets. Also, in January 1997, the Company acquired PackerWare Corporation ("PackerWare"), a manufacturer and marketer of plastic containers, drink cups, housewares, and lawn and garden products (the "PackerWare Acquisition"). Management believes that the PackerWare Acquisition significantly diversified and expanded the Company's position in the drink cup business and gave the Company immediate penetration into the housewares market. In May 1997, Berry Plastics Design Corporation ("Berry Design"), a newly formed wholly owned subsidiary of the Company, acquired substantially all of the assets of Virginia Design Packaging Corp. ("Virginia Design"), a manufacturer and marketer of injection-molded containers used primarily for food packaging. Management believes that the acquisition of these assets has enhanced the Company's position in the food packaging and food service markets. In August 1997, the Company acquired Venture Packaging, Inc. ("Venture Packaging"), a manufacturer and marketer of injection-molded containers used in the food, dairy and various other markets. Management believes that the acquisition strategically assisted the Company in marketing its product line of open-top containers and lids. In July 1998, NIM Holdings ("NIM Holdings"), a newly formed wholly owned subsidiary of the Company, acquired all of the capital stock of Norwich Injection Moulders Limited ("Norwich Moulders"), a manufacturer and marketer of injection-molded overcaps and closures for the European market (the "Berry UK Acquisition"). In fiscal 1999, the Company changed the name from Norwich Injection Moulders Limited to Berry Plastics UK Limited ("Berry UK"). Management believes that the Berry UK Acquisition provided the Company with a production platform that allows it to better serve its global customers and introduce its other product lines in Europe. In October 1998, Knight Plastics, Inc. ("Knight") acquired substantially all of the assets of the Knight Engineering and Plastics Division of Courtaulds Packaging Inc. (the "Knight Acquisition"), a manufacturer of aerosol overcaps. Management believes that the Knight Acquisition enhanced the Company's overcap business and better positioned the Company to meet the needs of its domestic and multi-national customers. In July 1999, the Company acquired all of the outstanding capital stock of CPI Holding Corporation ("CPI Holding"), the parent company of Cardinal Packaging, Inc. ("Cardinal"), a manufacturer and marketer of open-top containers (the "Cardinal Acquisition"). Management believes that the Cardinal Acquisition enhanced the Company's open-top container product selection and provided many of its customers with a single packaging supplier. -5- In May 2000, Berry acquired all of the outstanding capital stock of Poly- Seal Corporation ("Poly-Seal"), a manufacturer and marketer of closures (the "Poly-Seal Acquisition"). Management believes that the Poly-Seal Acquisition was a major step in expanding the Company's participation in the closures business and provided a U.S. closure production platform in Baltimore, Maryland. In October 2000, Berry, through its Italian subsidiary, CBP Holdings S.r.l., acquired all of the outstanding capital stock of Capsol S.p.a. ("Capsol") and the whole quota capital of a related company, Ociesse S.r.l. (the "Capsol Acquisition"). Capsol is a manufacturer and marketer of aerosol overcaps and closures. Management believes that the Capsol Acquisition EXPANDED THE COMPANY'S PARTICIPATION IN THE EUROPEAN MARKET FOR OVERCAPS AND CLOSURES. On May 14, 2001, Berry acquired all of the outstanding capital stock of Pescor Plastics, Inc. ("Pescor") for aggregate consideration of approximately $24.8 million. The purchase was financed through the issuance by Holding of $9.8 million of 14% preferred stock and additional borrowings under the senior credit facility. Management believes that the acquisition enhanced the Company's position in the drink cup business. As the Company previously announced, in January 2002, the Board of Directors of Berry retained certain investment banking firms to assist it in considering certain strategic transactions designed to realize shareholders values, including the possibility of a combination with a company in the industry or a sale of the company in a negotiated transaction. As part of this effort, these firms have initiated the process of soliciting offers for the company. There can be no assurance that a strategic transaction involving Berry will be completed and, if completed, there can be no assurance as to the timing or terms thereof. OPEN-TOP CONTAINER MARKET The Company classifies its containers into six product lines: thinwall, pry-off, dairy, polypropylene, industrial, and specialty. Management believes that the Company is the leading manufacturer in the thinwall, pry- off and frozen dessert (component of dairy) container markets. The following table describes each of the Company's container product lines.
MAJOR END PRODUCT LINE DESCRIPTION SIZES MARKETS ------------- ------------------------------------ ------------- ---------------------- Thinwall Thinwalled, multi-purpose containers 8 oz. to 2 Food, promotional with or without handles and lids gallons products, toys and a wide variety of other uses Pry-off Containers having a tight lid-fit and 4 oz. to 2 Building products, requiring an opening device and also gallons adhesives, pool and meet the Consumer Product Safety other chemicals, Commission standards for child safety and other industrial uses Dairy Thinwall containers in traditional 4 oz. to 5 Cultured dairy products dairy market sizes and styles lbs., including yogurt, Multi-pack cottage cheese, sour cream and dips, and frozen desserts Polypropylene Usually clear containers in round, 6 oz. to 5 Food, deli, sauces oblong or rectangular shapes lbs. and salads Industrial Thick-walled, larger pails designed to 2.5 to 5 Building products, accommodate heavy loads gallons chemicals, paints and other industrial uses Specialty Customer specific Various Premium consumer items, such as tobacco and drink mixes
The largest end-uses for the Company's containers are food products, building products, chemicals and dairy products. The Company has a diverse customer base for its container lines, and no single container customer exceeded 3% of the Company's total net sales in fiscal 2001. -6- Management believes that the Company offers the broadest product line among U.S.-based injection-molded plastic container manufacturers. The Company's container capacities range from 4 ounces to 5 gallons and are offered in various styles with accompanying lids, bails and handles, as well as a wide array of decorating options. In addition to a complete product line, the Company has sophisticated printing capabilities, an in-house graphic arts department, low cost manufacturing capability with eleven plants strategically located throughout the United States and a dedication to high quality products and customer service. Product engineers work with customers to design and commercialize new containers. In addition, as part of the Company's dedication to customer service, the Company provides filling machine equipment to many of the its customers, primarily in the dairy market, and also provides the services necessary to operate such equipment. The Company believes providing such equipment and services increases customer retention by increasing the customer's production efficiency. The Company seeks to develop niche container products and new applications by taking advantage of the Company's state-of-the-art decorating and graphic arts capabilities and dedication to service and quality. Management believes that these capabilities have given the Company a significant competitive advantage in certain high-margin niche container applications for specialized products. Examples include popcorn containers for new movie promotions and professional and college sporting and entertainment events, where the ability to produce sophisticated and colorful graphics is crucial to the product's success. In order to identify new applications for existing products, the Company relies extensively on its national sales force. Once these opportunities are identified, the Company's sales force interfaces with the Company's product design engineers to satisfy customers' needs. In non-industrial containers, the Company's strongest competitors include Airlite, Sweetheart, Landis, and Polytainers. The Company also produces commodity industrial pails for a market that is dominated by large volume competitors such as Letica, Plastican, NAMPAC and Ropak. The Company does not participate heavily in this large market. AEROSOL OVERCAP MARKET Based on discussions with our customers, sales representatives and external sales brokers, the Company believes it is the worldwide leader in the production of aerosol overcaps. Approximately 19% of the U.S. market consists of marketers who produce overcaps in-house for their own needs. Management believes that a portion of these in-house producers will increase the outsourcing of their production to high technology, low cost manufacturers, such as the Company, as a means of reducing manufacturing assets and focusing on their core marketing objectives. The Company's aerosol overcaps are used in a wide variety of consumer goods markets including spray paints, household and personal care products, insecticides and numerous other commercial and consumer products. Most U.S. manufacturers and contract fillers of aerosol products are customers of the Company for some portion of their needs. Management believes that, over the years, the Company has developed several significant competitive advantages, including a reputation for outstanding quality, short lead-time requirements to fill customer orders, long-standing relationships with major customers, the ability to accurately reproduce over 3,500 colors, proprietary packing technology that minimizes freight cost and warehouse space, high-speed, low-cost molding and decorating capability and a broad product line of proprietary molds. The Company continues to develop new products in the overcap market, including the "spray-thru" line of aerosol overcaps. In fiscal 2001, no single aerosol overcap customer accounted for over 2% of the Company's total net sales. Competitors in this market include Dubuque Plastics, Cobra and Plasticum. In addition, a number of companies, including several of the Company's customers currently produce aerosol overcaps for their own use. -7- CLOSURE MARKET The Company initiated an acquisition strategy to establish itself as a global provider in the closures market with the Berry UK Acquisition. The Company continued executing the strategy in 2000 with the Poly-Seal Corporation Acquisition and the Capsol Acquisition. Management believes the combined product line offerings to the closures market establish the Company as a leading provider of closure systems globally. The product line offerings include continuous thread, dispensing, tamper evident, and child resistant closures. In addition, the Company is a leading provider of fitments and plugs for medical applications, cups and spouts for liquid laundry detergent, dropper bulb assemblies for medical and personal care applications, and jiggers for mouthwash products. The Company's closures are used in a wide variety of consumer goods markets including health and beauty aids, pharmaceutical, household chemicals, commercial chemicals, and food and dairy. The Company is a major provider of closures to many of the leading companies in these markets. Management believes the capabilities and expertise the Company has established as a closure provider create significant competitive advantages, including the latest in single and bi-injection technology, molding of thermoplastic and thermoset resins, compression molding of thermoplastic resins, and lining and assembly applications applying the latest in vision inspection technology. In addition, the Company has an in-house package development and design group focused on developing new closure systems to meet both customers proprietary needs and stock systems for the changing closure needs of the markets served. The Company has an outstanding reputation for quality and has received numerous "Supplier Quality Achievement Awards" from customers in different markets. In fiscal 2001, no single closure customer accounted for over 2% of the Company's total net sales. Major competitors in this market include Owens- Illinois, Kerr/Suncoast, Phoenix Closures, Portola, Rexam Closures, and Seaquist Closures. DRINK CUP MARKET Based on discussions with our customers, sales representatives and external sales brokers, the Company believes that it is the leading provider of injection molded plastic drink cups in the U.S. As beverage producers, convenience stores and fast food restaurants increase their marketing efforts for larger sized drinks, the Company believes that the plastic drink cup market will expand because of plastic's desirability over paper for larger drink cups. The Company produces injection-molded plastic cups that range in size from 12 to 64 ounces. Primary markets are fast food and family dining restaurants, convenience stores, stadiums, and retail stores. Virtually all cups are decorated, often as promotional items, and Berry is known in the industry for innovative, state-of-the-art graphics capability. Berry launched its thermoformed drink cup line in fiscal 2001. The Company's thermoformed product line offers sizes ranging from 22 to 44 ounces. The Company's thermoform process is unique in the industry and offers material competitive advantages both in terms of relative price and structural features versus competitive thermoformed drink cups. In fiscal 2001, no single drink cup customer accounted for more than 5% of the Company's total net sales. Major drink cup competitors include Huhtamaki (formerly Packaging Resources Incorporated) and WNA (formerly Cups Illustrated). HOUSEWARES MARKET The housewares market is a multi-billion dollar market. The Company's participation is focused on producing seasonal (spring and summer) semi- disposable plastic housewares and plastic lawn and garden products. Examples of our products include plates, bowls, pitchers, tumblers and outdoor flowerpots. Berry sells virtually all of its products in this market through major national retail marketers and national chain stores, including Wal-Mart and Target. PackerWare is a recognized brand name in these markets and PackerWare branded products are often co-branded by the Company's customers. The Company's position in this market has been to provide a high value to consumers at a relatively modest price, consistent with the key price points of the retail marketers. Berry believes outstanding service and ability to deliver products with timely combination of color and design further enhance its position in this market. This focus allowed PackerWare to be named 1998 Vendor of the Year by Wal-Mart in its Housewares division. -8- In fiscal 2001, no single housewares customer accounted for more than 5% of the Company's total net sales. Major housewares competitors include imported products from China, Arrow Plastics, and United Plastics. MARKETING AND SALES The Company reaches its large and diversified base of over 12,000 customers primarily through its direct field sales force. These field sales representatives are focused on individual product lines, but are encouraged to sell all Company products to serve the needs of the Company's customers. The Company believes that a direct field sales force is able to better focus on target markets and customers, with the added benefit of permitting the Company to control pricing decisions centrally. The Company also utilizes the services of manufacturing representatives to assist its direct sales force. The Company believes that it produces a high level of customer satisfaction. Highly skilled customer service representatives are located in each of the Company's facilities to support the national field sales force. In addition, telemarketing representatives, marketing managers and sales/marketing executives oversee the marketing and sales efforts. Manufacturing and engineering personnel work closely with field sales personnel to satisfy customers' needs through the production of high quality, value-added products and on-time deliveries. Additional marketing and sales techniques include a Graphic Arts department with computer-assisted graphic design capabilities and in-house production of photopolymer printing plates. Berry also has a centralized Color Matching and Materials Blending department that utilizes a computerized spectrophotometer to insure that colors match those requested by customers. MANUFACTURING GENERAL The Company primarily manufactures its products using the plastic injection molding process. The process begins when plastic resin, in the form of small pellets, is fed into an injection molding machine. The injection molding machine then melts the plastic resin and injects it into a multi-cavity steel mold, forcing the plastic resin to take the final shape of the product. At the end of each molding cycle (generally five to 25 seconds), the plastic parts are ejected from the mold into automated handling systems from which they are packed in corrugated containers for further processing or shipment. After molding, the product may be either decorated (printing, silk-screening, labeling) or assembled (e.g., bail handles fitted to containers). The Company believes that its molding and decorating capabilities are among the best in the industry. The Company's overall manufacturing philosophy is to be a low-cost producer by using high speed molding machines, modern multi-cavity hot runner, cold runner and insulated runner molds, extensive material handling automation and sophisticated printing technology. The Company utilizes state-of-the-art robotic packaging processes for large volume products, which enables the Company to deliver a higher quality product (due to reduced breakage) while lowering warehousing and shipping costs (due to more efficient use of space). Each plant has complete tooling maintenance capability to support molding and decorating operations. The Company has historically made, and intends to continue to make, significant capital investments in plant and equipment because of the Company's objectives to grow, improve productivity, and maintain competitive advantages. PRODUCT DEVELOPMENT The Company utilizes full-time product engineers who use three-dimensional computer-aided-design (CAD) technology to design and modify new products and prepare mold drawings. Engineers use an in-house model shop, which includes a thermoforming machine, to produce prototypes and sample parts. The Company can simulate the molding environment by running unit-cavity prototype molds in a small injection molding machine dedicated to research and development of new products. Production molds are then designed and outsourced for production by various companies with whom the Company has extensive experience and established relationships. The Company's engineers oversee the mold-building process from start to finish. -9- QUALITY ASSURANCE Each plant extensively utilizes Total Quality Management philosophies, including the use of statistical process control and extensive involvement of employees to increase productivity. This teamwork approach to problem-solving increases employee participation and provides necessary training at all levels. The Evansville, Henderson, Iowa Falls, Charlotte, Lawrence, Suffolk, Monroeville, Woodstock, Streetsboro, Baltimore, and Milan, plants have been approved for ISO certification, which certifies compliance by a company with a set of shipping, trading and technology standards promulgated by the International Standardization Organization ("ISO"). The Company is actively pursuing ISO certification in all of the remaining facilities. Extensive testing of parts for size, color, strength and material quality using statistical process control (SPC) techniques and sophisticated technology is also an ongoing part of the Company's traditional quality assurance activities. SYSTEMS Berry utilizes a fully integrated computer software system at its plants capable of producing complete financial and operational reports. This accounting and control system is easily expandable to add new features and/or locations as the Company grows. In addition, the Company has in place a sophisticated quality assurance system, a bar code based material management system and an integrated manufacturing system. SOURCES AND AVAILABILITY OF RAW MATERIALS The most important raw material purchased by the Company is plastic resin. The Company purchased approximately $110.5 million of resin in fiscal 2001. Approximately 50% of the resin pounds purchased were high density polyethylene ("HDPE"), 13% linear low density polyethylene and 37% polypropylene. The Company's purchasing strategy is to deal with only high-quality, dependable suppliers, such as Dow, Chevron, Nova, Equistar, and ExxonMobil. Although the Company does not have any supply requirements contracts with its key suppliers, management believes that the Company has maintained outstanding relationships with these key suppliers over the past several years and expects that such relationships will continue into the foreseeable future. Based on its experience, the Company believes that adequate quantities of plastic resins will be available, but no assurances can be given. EMPLOYEES At the end of fiscal 2001, the Company had approximately 3,100 employees. Poly-Seal Corporation, a wholly owned subsidiary, and the United Steelworkers of America are parties to a collective bargaining agreement which expires on April 24, 2005. As of the end of fiscal 2001, 330 employees of Poly-Seal Corporation were covered by this agreement. PATENTS AND TRADEMARKS The Company has numerous patents and trademarks with respect to its products. None of the patents or trademarks are considered by management to be material to the business of the Company. ENVIRONMENTAL MATTERS AND GOVERNMENT REGULATION The past and present operations of the Company and the past and present ownership and operations of real property by the Company are subject to extensive and changing federal, state and local environmental laws and regulations pertaining to the discharge of materials into the environment, the handling and disposition of wastes or otherwise relating to the protection of the environment. The Company believes that it is in substantial compliance with applicable environmental laws and regulations. However, the Company cannot predict with any certainty that it will not in the future incur liability under environmental statutes and regulations with respect to non-compliance with environmental laws, contamination of sites formerly or currently owned or operated by the Company (including contamination caused by prior owners and operators of such sites) or the off-site disposal of hazardous substances. Like any manufacturer, the Company is subject to the possibility that it may receive notices of potential liability, pursuant to CERCLA or analogous state laws, for cleanup costs associated with offsite waste recycling or disposal facilities at which wastes associated with its operations have allegedly come to be located. Liability under CERCLA is strict, retroactive and joint and several. No such notices are currently pending. -10- The Food and Drug Administration (the "FDA") regulates the material content of direct-contact food containers and packages, including certain thinwall containers manufactured by the Company. The Company uses approved resins and pigments in its direct contact food products and believes it is in material compliance with all such applicable FDA regulations. The plastics industry, including the Company, is subject to existing and potential Federal, state, local and foreign legislation designed to reduce solid wastes by requiring, among other things, plastics to be degradable in landfills, minimum levels of recycled content, various recycling requirements, disposal fees and limits on the use of plastic products. In addition, various consumer and special interest groups have lobbied from time to time for the implementation of these and other similar measures. The principal resin used in the Company's products, HDPE, is recyclable, and, accordingly, the Company believes that the legislation promulgated to date and such initiatives to date have not had a material adverse effect on the Company. There can be no assurance that any such future legislative or regulatory efforts or future initiatives would not have a material adverse effect on the Company. On January 1, 1995, legislation in Oregon, California and Wisconsin went into effect requiring products packaged in rigid plastic containers to comply with standards intended to encourage recycling and increased use of recycled materials. Although the regulations vary by state, the principal requirement is the use of post consumer regrind ("PCR") as an ingredient in containers sold for non-food uses. Additionally, Oregon and California allow lightweighting of the container or concentrating the product sold in the container as options for compliance. Oregon and California provide for an exemption from all such regulations if statewide recycling reaches or exceeds 25% of rigid plastic containers. In September 1996, California passed a new bill exempting food and cosmetics containers from the foregoing requirement. However, non-food containers are still required to comply. The Company assists its customers with their compliance of these regulations. In December 1996, the Department of Environmental Quality estimated that Oregon had met its recycling goal of 25% for 1997 (based on 1996 data), and accordingly, was in compliance for the 1997 calendar year. However, in January 1998, California formally approved a 23.2% recycling rate for the state during 1996, and since this falls below the required 25% rate for exemption of non-food containers, the state can now begin enforcing its recycled content mandate on any non-food plastic containers from 8 oz. to 5 gallons. The Company, in order to facilitate individual customer compliance with these regulations, is providing customers the option of purchasing containers with reduced weight. -11- ITEM 2. PROPERTIES The following table sets forth the Company's principal manufacturing facilities:
LOCATION ACRES SQUARE FOOTAGE USE OWNED/LEASED ----------------- ------ -------------- ------------------ ------------ Evansville, IN 18.7 420,000 Headquarters Owned and manufacturing Evansville, IN 2.8 123,000 Manufacturing Leased Henderson, NV 12.3 175,000 Manufacturing Owned Iowa Falls, IA 14.0 100,000 Manufacturing Owned Charlotte, NC 37.3 150,000 Manufacturing Owned Lawrence, KS 19.3 500,000 Manufacturing Owned Suffolk, VA 14.0 110,000 Manufacturing Owned Monroeville, OH 34.7 220,000 Manufacturing Owned Norwich, England 5.0 88,000 Manufacturing Owned Woodstock, IL 11.7 170,000 Manufacturing Owned Streetsboro, OH 12.0 140,000 Manufacturing Owned Baltimore, MD 9.9 225,000 Manufacturing Owned Milan, Italy 11.6 125,000 Manufacturing Leased Fort Worth, TX 9.8 160,000 Manufacturing Leased
The Company believes that its property and equipment are well-maintained, in good operating condition and adequate for its present needs. ITEM 3. LEGAL PROCEEDINGS The Company is party to various legal proceedings involving routine claims which are incidental to its business. Although the Company's legal and financial liability with respect to such proceedings cannot be estimated with certainty, the Company believes that any ultimate liability would not be material to its financial condition. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS By Written Consent in Lieu of a Meeting of the Stockholders of BPC Holding Corporation dated May 9, 2001, stockholders that hold 95% of the stock entitled to vote approved an amendment to the Company's Restated Certificate of Incorporation to increase the number of authorized shares of Preferred Stock from 2,200,000 to 2,314,000, consisting of 600,000 shares of Series A Cumulative Preferred Stock, 200,000 shares of Series B Cumulative Preferred Stock, 1,400,000 shares of Series A-1 Preferred Stock, 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, 3,027 shares of Series C-5 Preferred Stock, and 100,000 shares of Series D Preferred Stock. By Written Consent in Lieu of a Meeting of the Stockholders of BPC Holding Corporation dated May 31, 2001, stockholders that hold 95% of the stock entitled to vote (i) re-elected the following members to the Board of Directors: Roberto Buaron, David M. Clarke, Lawrence G. Graev, Donald J. Hofmann, Jr., Joseph S. Levy and Mathew J. Lori, who were all board members prior to the election, and (ii) accepted the resignation of Martin R. Imbler as a Director of BPC Holding Corporation and elected Ira G. Boots as a member of the Board of Directors to replace Mr. Imbler. Mr. Boots, together with those members of the Board of Directors who were re-elected, comprise the entire board. -12- PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS There is no public trading market for any class of common stock of Holding or the Company. With respect to the capital stock of Holding, as of March 15, 2002, there were three holders of the Class A Voting Common Stock, three holders of the Class A Nonvoting Common Stock, 40 holders of the Class B Voting Common Stock, 106 holders of the Class B Nonvoting Common Stock and 39 holders of the Class C Nonvoting Common Stock. All of the issued and outstanding common stock of the Company is held by Holding. On April 21, 1994, the Company paid a $50.0 million dividend, which was financed through the issuance of $100.0 million aggregate principal amount of 12.25% Berry Plastics Corporation Senior Subordinated Notes, due 2004, to Holding, the holder of all of its common stock. Holding utilized the $50.0 million dividend to make a distribution to the holders of its common stock and holders of certain other equity interests. Other than the payment of the $50.0 million distribution described above, Holding has not paid cash dividends on its capital stock. Because Holding intends to retain any earnings to provide funds for the operation and expansion of the Company's business and to repay outstanding indebtedness, Holding does not intend to pay cash dividends on its common stock in the foreseeable future. Furthermore, as a holding company with no independent operations, the ability of Holding to pay cash dividends will be dependent on the receipt of dividends or other payments from the Company. Under the terms of the Indenture dated as of April 21, 1994 (the "1994 Indenture"), among the Company, Holding, Berry Iowa Corporation, Berry Tri-Plas and The Bank of New York, as successor to the United States Trust Company of New York, as Trustee ("U.S. Trust"), the Indenture dated June 18, 1996 (the "1996 Indenture"), between Holding and First Trust of New York, National Association, as Trustee, and also the Indenture dated August 24, 1998 (the "1998 Indenture") and the Indenture dated July 6, 1999 (the "1999 Indenture"), among Holding, all of its direct and indirect subsidiaries and The Bank of New York, Holding and the Company are not permitted to pay any dividends on their common stock for the foreseeable future. In addition, the Company's senior credit facility contains covenants that, among other things, restricts the payment of dividends by the Company. In addition, Delaware law limits Holding's ability to pay dividends from current or historical earnings or profits or capital surplus. Any determination to pay cash dividends on common stock of the Company or Holding in the future will be at the discretion of the Board of Directors of the Company and Holding, respectively. -13- ITEM 6. SELECTED FINANCIAL DATA The following selected financial data are derived from the consolidated financial statements of Holding which have been audited by Ernst & Young LLP, independent auditors. The data should be read in connection with the consolidated financial statements, related notes and other financial information included herein. Holding's fiscal year is a 52/53 week period ending generally on the Saturday closest to December 31. All references herein to "2001," "2000," "1999," "1998," and "1997," relate to the fiscal years ended December 29, 2001, December 30, 2000, January 1, 2000, January 2, 1999, and December 27, 1997, respectively.
BPC HOLDING CORPORATION FISCAL ----------------------------------------------------------- 2001 2000 1999 1998 1997 -------- -------- -------- -------- -------- (IN THOUSANDS OF DOLLARS) Statement of Operations Data: Net sales $461,659 $408,088 $328,834 $271,830 $226,953 Cost of goods sold 338,000 312,119 241,067 199,227 180,249 --------- --------- --------- --------- --------- Gross margin 123,659 95,969 87,767 72,603 46,704 Operating expenses (a) 70,192 65,862 54,118 44,001 30,505 --------- --------- --------- --------- --------- Operating income 53,467 30,107 33,649 28,602 16,199 Other expenses (b) 473 877 1,416 1,865 226 Interest expense, net (c) 54,355 51,457 40,817 34,556 30,246 --------- --------- --------- --------- --------- Loss before income taxes and extraordinary item (1,361) (22,227) (8,584) (7,819) (14,273) Income taxes (benefit) 734 (142) 554 (249) 138 --------- --------- --------- --------- --------- Loss before extraordinary item (2,095) (22,085) (9,138) (7,570) (14,411) Extraordinary item net of tax (d) - 1,022 - - - --------- --------- --------- --------- --------- Net loss (2,095) (23,107) (9,138) (7,570) (14,411) Preferred stock dividends 9,790 6,655 3,776 3,551 2,558 Amortization of preferred stock discount 1,024 768 292 292 74 --------- --------- --------- --------- --------- Net loss attributable to common shareholders $(12,909) $ (30,530) $ (13,206) $ (11,413) $(17,043) ========= ========= ========= ========= ========= Balance Sheet Data (at end of year): Working capital $ 19,327 $ 20,470 $ 10,527 $ 4,762 $ 20,863 Fixed assets 203,217 179,804 146,792 120,005 108,218 Total assets 446,876 413,122 340,807 255,317 239,444 Total debt 485,881 468,806 403,989 323,298 306,335 Stockholders' equity (deficit) (139,601) (137,997) (133,471) (120,357) (108,975) Other Data: Depreciation and amortization (e) $ 50,907 $ 42,148 $ 31,795 $ 24,830 $ 19,026 Capital expenditures 32,834 31,530 30,738 22,595 16,774
(a) Operating expenses include business startup and machine integration expenses of $2,690 related to recent acquisitions, and plant consolidation expenses of $2,221 related to the shutdown and reorganization of facilities during fiscal 2001; business start-up and machine integration expenses of $2,237 related to recent acquisitions, litigation expenses of $700 related to a drink cup patent, and plant consolidation expenses of $3,702 related to the shutdown and reorganization of facilities during fiscal 2000; business start-up and machine integration expenses of $3,647 related to recent acquisitions and plant consolidation expenses of $1,501 related to the shutdown and reorganization of facilities during fiscal 1999; business start-up and machine integration expenses of $1,272 related to the businesses acquired in 1997, plant consolidation expenses of $2,370 and $191 related to the shutdown of the Anderson, South Carolina and Reno, Nevada facilities, and start-up expenses of $109 and $142 related to the Norwich and Knight Acquisitions, respectively, during fiscal 1998; and business start-up and machine integration expenses of $3,255 related to the businesses acquired in 1997, plant consolidation expenses of $480 and $368 related to the shutdown of the Winchester, Virginia and Reno, Nevada facilities, respectively, during fiscal 1997. (b) Other expenses consist of net losses on disposal of property and equipment for the respective years. (c) Includes non-cash interest expense of $11,268, $18,047, $15,567, $14,824, and $13,065, in fiscal 2001, 2000, 1999, 1998, and 1997, respectively. (d) Extraordinary item relates to deferred financing fees written off as a result of amending the senior credit facility. (e) Depreciation and amortization excludes non-cash amortization of deferred financing fees and debt premium/discount amortization which are included in interest expense. -14- ITEM 7. 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. Consolidated earnings have been insufficient to cover fixed charges by $0.8 million, $20.5 million, and $7.1 million for fiscal years 2001, 2000, and 1999, respectively. In addition, Holding has experienced consolidated net losses during each of such periods principally as a result of expenses and charges incurred in connection with acquisitions by Berry. These net losses were $2.1 million, $23.1 million, and $9.1 million for fiscal 2001, 2000, and 1999, respectively. CRITICAL ACCOUNTING POLICIES The Company has disclosed those accounting policies that it considers to be significant in determining the amounts to be utilized for communicating its consolidated financial position, results of operations and cash flows in the second note to its consolidated financial statements included elsewhere herein. Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with these principles requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Actual results are likely to differ from these estimates, but management does not believe such differences will materially affect the Company's financial position or results of operations. Based on a critical assessment of its accounting policies and the underlying judgements and uncertainties affecting the application of those policies, management believes that the Company's consolidated financial statements provide a meaningful and fair perspective of the Company. This is not to suggest that other risk factors such as changes in economic conditions, changes in material costs, and others could not adversely impact the Company's consolidated financial position, results of operations and cash flows in future periods. YEAR ENDED DECEMBER 29, 2001 COMPARED TO YEAR ENDED DECEMBER 30, 2000 NET SALES. Net sales increased 13% to $461.7 million in 2001, up $53.6 million from $408.1 million in 2000, including an approximate 1% increase in net selling price. Container net sales increased $3.2 million, primarily due to a large promotion in 2001. Closure net sales increased $20.2 million with the Poly-Seal Acquisition and Capsol Acquisition representing $25.4 million of the increase, partially offset by a general slowdown in the market. Consumer products net sales increased $30.2 million in 2001 primarily as a result of the Pescor Acquisition which contributed 2001 net sales of approximately $19.9 million, continued strong demand in the retail housewares market, and the introduction of a thermoformed drink cup line. -15- GROSS MARGIN. Gross margin increased $27.7 million from $96.0 million (24% of net sales) in 2000 to $123.7 million (27% of net sales) in 2001. This increase of 29% 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 1% increase in net selling price was primarily the result of partially recovering raw material costs increases incurred in 2000. In addition, the Company has continued to consolidate the 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. Also, in the fourth quarter of 2001, the Company removed molding operations from its Fort Worth, Texas facility (acquired in the Pescor Acquisition). 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 decorating equipment at several of the Company's facilities. Additional 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 increased $0.4 million as a result of acquired businesses partially offset by savings from the organizational realignment in the third quarter of 2000. General and administrative expenses increased $4.1 million in 2001 primarily as a result of acquired businesses and increased accrued bonus expenses partially offset by savings from the organizational realignment in the third quarter of 2000. Research and development costs decreased $0.7 million to $1.9 million in 2001 primarily as a result of savings from the organizational realignment in the third quarter of 2000. Intangible asset amortization increased from $10.6 million in 2000 to $12.8 million for 2001, primarily as a result of the amortization of goodwill ascribed to acquired companies in 2000 and 2001. Other expenses were $4.9 million for 2001 compared to $6.6 million for 2000. Other expenses in 2001 include one-time transition expenses of $2.7 related to recently acquired businesses and $2.2 related to the shutdown and reorganization of facilities. Other expenses in 2000 include one-time transition expenses of $2.2 million related to recent acquisitions, $3.7 million related to the shutdown and reorganization of facilities, and $0.7 million of litigation expenses related to a drink cup patent. INTEREST EXPENSE, NET. Net interest expense, including amortization of deferred financing costs for 2001, was $54.4 million (12% of net sales) compared to $51.5 million (13% of net sales) in 2000, an increase of $2.9 million. This increase is attributed to interest on borrowings related to the acquired businesses in 2000 and 2001 but was offset partially by principal reductions. Cash interest paid in 2001 was $44.2 million as compared to $32.8 million for 2000. INCOME TAXES. During fiscal 2001, the Company recorded an expense of $0.7 million for income taxes compared to a benefit of $0.1 million for fiscal 2000. The Company continues to operate in a net operating loss carryforward position for federal income tax purposes. EXTRAORDINARY ITEM. As a result of amending the Company's senior credit facility, $1.0 million of deferred financing fees related to the facility was charged to expense in 2000 as an extraordinary item. NET LOSS. The Company recorded a net loss of $2.1 million in 2001 compared to a $23.1 million net loss in 2000 for the reasons stated above. YEAR ENDED DECEMBER 30, 2000 COMPARED TO YEAR ENDED JANUARY 1, 2000 NET SALES. Net sales increased 24% to $408.1 million in 2000, up $79.3 million from $328.8 million in 1999, including an approximate 5% increase in net selling price due to increased raw material costs. Overcap and closure net sales increased $31.2 million, primarily due to the Poly-Seal Acquisition and Capsol Acquisition which provided combined 2000 net sales of $32.3 million. Container sales increased $42.5 million, primarily due to the Cardinal Acquisition and increased selling prices, despite a large specialty program in 1999 that did not reoccur in 2000. Net sales in the drink cup and housewares segment increased $5.6 million in 2000 primarily as a result of a significant new product and strong retail demand in housewares. -16- GROSS MARGIN. Gross margin increased $8.2 million or 9% from $87.8 million (27% of net sales) in 1999 to $96.0 million (24% of net sales) in 2000. This increase of 9% includes the combined impact of the added Poly- Seal, Capsol, and Cardinal sales volume, acquisition integration, and productivity improvement initiatives offset partially by the cyclical impact of higher raw material costs. The cost of the Company's primary raw material, resin, increased approximately 36% in 2000 when compared to 1999. A major focus continues to be the consolidation of products and business of recent acquisitions to the most efficient tooling, providing customers with improved products and customer service. As part of the integration, the Company closed its York, Pennsylvania facility and removed remaining production from its Minneapolis, Minnesota facility (acquired in the Cardinal Acquisition) in the fourth quarter of 2000. Additionally, the Company closed its Arlington Heights, Illinois facility (acquired in the Knight Acquisition) in the first quarter of 1999 and its Ontario, California facility (acquired in the Cardinal Acquisition) in the third quarter of 1999. In addition, the Company made two configuration changes that were completed in the fourth quarter of 1999 with the Minneapolis, Minnesota and Iowa Falls, Iowa locations closing their molding operations. The business from these locations are distributed throughout Berry's facilities. Also, significant productivity improvements were made during the year, including the addition of state-of-the-art injection molding equipment, molds and printing equipment at several of the Company's facilities. OPERATING EXPENSES. Operating expenses during 2000 were $65.9 million (16% of net sales), compared with $54.1 million (16% of net sales) for 1999. Selling expenses increased $4.2 million, almost all as a result of acquired businesses. General and administrative expenses increased $2.4 million in 2000 primarily as a result of recent acquisitions, but was partially offset by decreased accrued bonus expenses. Research and development costs increased $0.3 million to $2.6 million in 2000 primarily as a result of increased new product requests from customers and productivity improvement initiatives. Intangible asset amortization increased from $7.2 million in 1999 to $10.6 million for 2000, primarily a result of the amortization of goodwill ascribed to acquired companies in 1999 and 2000. Other expenses were $6.6 million for 2000 compared to $5.1 million for 1999. Other expenses in 2000 include business start-up and machine integration expenses of $2.2 million related to recent acquisitions, plant consolidation expenses of $3.7 million related to the shutdown and reorganization of facilities, and $0.7 million of litigation expenses related to a drink cup patent. Other expenses in 1999 include business start-up and machine integration expenses of $3.6 million related to recent acquisitions and plant consolidation expenses of $1.5 million related to the shutdown and reorganization of facilities. INTEREST EXPENSE, NET. Net interest expense, including amortization of deferred financing costs for 2000, was $51.5 million (13% of net sales) compared to $40.8 million (12% of net sales) in 1999, an increase of $10.7 million. This increase is attributed to interest on borrowings related to the acquired businesses in 1999 and 2000, but was offset partially by principal reductions. Cash interest paid in 2000 was $32.8 million as compared to $29.8 million for 1999. INCOME TAXES. During fiscal 2000, the Company recorded a benefit of $0.1 million for income taxes compared to an expense of $0.6 million for fiscal 1999. The Company continues to operate in a net operating loss carryforward position for federal income tax purposes. EXTRAORDINARY ITEM. As a result of amending the Company's senior credit facility, $1.0 million of deferred financing and origination fees related to the facility have been charged to expense in 2000 as an extraordinary item. NET LOSS. The Company recorded a net loss of $23.1 million in 2000 compared to a $9.1 million net loss in 1999 for the reasons stated above. INCOME TAX MATTERS Holding has unused operating loss carryforwards of $37.7 million for federal income tax purposes which begin to expire in 2010. Alternative minimum tax credit carryforwards of approximately $3.1 million are available to Holding indefinitely to reduce future years' federal income taxes. -17- LIQUIDITY AND CAPITAL RESOURCES 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 December 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 December 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 $52.6 million term loan facility, (iv) a $2.0 million (using the December 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. At December 29, 2001, the Company had unused borrowing capacity under the Credit Facility's revolving line of credit of approximately $17.7 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. CBP Holdings, S.r.l. has a revolving credit facility (the "Italy Revolver") from Bank of America for $12.0 million (using the December 29, 2001 exchange rate) denominated in Euros. Bank of America also extends working capital financing (the "Italy Working Capital Line") of up to $1.5 million (using the December 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. The Credit Facility requires the Company to comply with specified financial ratios and tests, including a maximum leverage ratio and a fixed charge coverage ratio. The requirements of these tests may change on a quarterly basis. At December 29, 2001, the Credit Facility required the Company to have a maximum leverage ratio of 3.75 to 1 and a minimum fixed charge coverage ratio of 1.0 to 1. In addition it required that certain investments by the Company in its non-U.S. subsidiaries not be greater that $10.4 million. At December 29, 2001, the last quarterly test date, the Company was in compliance with all of the financial covenants tested on such date. The Credit Facility matures on January 21, 2004 unless previously terminated by the Company or by the lenders upon an Event of Default as defined in the Financing Agreement. The term loan facility requires periodic payments, varying in amount, through the maturity of the facility. Interest on borrowings under the Credit Facility is based on either (i) the lender's base rate (which is the higher of the lender's prime rate and the federal funds rate plus 0.5%) plus an applicable margin of 0.25% to 1.0% or (ii) eurodollar LIBOR (adjusted for reserves) plus an applicable margin of 2.25% to 3.00%, at the Company's option (4.4% at December 29, 2001 and 8.9% at December 30, 2000). Following receipt of the quarterly financial statements, the agent under the Credit Facility shall change the applicable interest rate margin on loans (other than under the UK Revolver and UK Term Loan) once per quarter to a specified margin determined by the ratio of funded debt to EBITDA of the Company and its subsidiaries. Notwithstanding the foregoing, interest on borrowings under the UK Revolver and the UK Term Loan is based on sterling LIBOR (adjusted for reserves) plus 2.25% and 2.75%, respectively. Interest on borrowings under the Italy Revolver and the Italy Working Capital Line is based on EURIBOR plus 2.0%. On July 17, 2000, Berry obtained a second lien senior credit facility from General Electric Capital Corporation for an aggregate principal amount of $25.0 million (the "Second Lien Senior Facility"), resulting in net proceeds of $24.3 million after fees and expenses. The proceeds were utilized to reduce amounts then outstanding under the US Revolver. The indebtedness is guaranteed by Holding and all of its subsidiaries (other than its subsidiaries in the United Kingdom and Italy). The Second Lien Senior Facility is secured by a second priority lien on substantially the same collateral as the collateral for the Credit Facility. The $25.0 million principal amount is due upon the Second Lien Senior Facility's maturity on January 21, 2004. Interest is based on either (i) the lender's base rate (which is the higher of the prime rate and the federal funds rate plus 0.5%) plus an applicable margin of 3.25% or (ii) eurodollar LIBOR (adjusted for reserves) plus an applicable margin of 4.75%, at the Company's option (6.8% at December 29, 2001 and 11.1% at December 30, 2000). The covenants under the Second Lien Senior Facility are substantially the same as those in the Credit Facility. The 1994 Indenture, 1996 Indenture, 1998 Indenture, and 1999 Indenture restrict the Company's ability to incur additional debt and contain other provisions which could limit the liquidity of the Company. At December 29, 2001, the Company had unused borrowing capacity under the Credit Facility's borrowing base of $17.7 million, which is not considered additional -18- indebtedness under the 1994 Indenture, 1996 Indenture, 1998 Indenture or 1999 Indenture. Any additional indebtedness above the borrowing base requires approval from the Credit Facility's lenders. 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 Holding's 12.50% Series B Senior Secured Notes due 2006 (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 paid interest, at an increased rate of 0.75% per annum, in additional 1996 Notes valued at 100% of the principal amount thereof. Holding 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 notes issued under the 1994 Indenture, 1998 Indenture, and 1999 Indenture 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 the tax sharing agreement to enable Holding to make the June 2002 cash interest payment on the 1996 Notes, subject to Berry's ability to generate sufficient operating results to comply with the financial covenants in 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. Holding's contractual cash obligations as of December 29, 2001 are summarized in the following table.
PAYMENTS DUE BY PERIOD AT DECEMBER 29, 2001 ------------------------------------------------- < 1 1-3 4-5 > 5 TOTAL YEARS YEARS YEARS YEARS Long-term debt, excluding capital leases $467,363 $19,169 $235,980 $136,714 $75,500 Capital leases 18,131 3,123 3,911 3,315 7,782 Operating leases 24,065 7,594 10,521 5,219 731 Other long-term obligations 31,261 2,554 1,261 - 27,446 --------- --------- --------- --------- --------- Total contractual cash obligations $540,820 $32,440 $251,673 $145,248 $111,459 ========= ========= ========= ========= =========
Net cash provided by operating activities was $54.3 million in 2001 as compared to $36.1 million in 2000. Net cash provided by operating activities was $36.0 million in 1999. The increase in 2001 was primarily the result of improved operating performance as the Company's net loss plus non-cash expenses improved $21.8 million. Net cash used by investing activities decreased from $108.7 million in 2000 to $56.3 million in 2001 primarily as a result of the Poly-Seal Acquisition in 2000. Capital expenditures in 2001 were $32.8 million, an increase of $1.3 million from $31.5 million in 2000. Capital expenditures totaled $30.7 million in 1999. Capital expenditures in 2001 included investments of $2.6 million for facility renovations, production systems and offices necessary to support production operating levels throughout the Company, $16.3 million for molds, $8.2 million for molding and printing machines, and $5.7 million for accessory equipment and systems. The capital expenditure budget for 2002 is expected to be $33.6 million. Net cash provided by financing activities was $0.6 million in 2001 as compared to $72.0 million in 2000. The decrease of $71.4 million can be primarily attributed to reduced acquisition related activities as noted above. Net cash provided by financing activities was $72.0 million in 2000 as compared to $71.1 million in 1999. 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. However, the Company anticipates that its cash interest, working capital and capital expenditure requirements for 2002 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 December 29, 2001, the Company's cash balance was $1.2 million, and Berry had unused borrowing capacity under the Credit Facility's borrowing base of $17.7 million. -19- GENERAL ECONOMIC CONDITIONS AND INFLATION The Company faces various economic risks ranging from an economic downturn adversely impacting the Company's primary markets to market fluctuations in plastic resin prices. In the short-term, rapid increases in resin cost may not be fully recovered through price increases to customers. Also, shortages of raw materials may occur from time to time. In the long-term, however, raw material availability and price changes generally do not have a material adverse effect on gross margin. Cost changes generally are passed through to customers. In addition, the Company believes that its sensitivity to economic downturns in its primary markets is less significant due to its diverse customer base and its ability to provide a wide array of products to numerous end markets. The Company believes that it is not affected by inflation except to the extent that the economy in general is thereby affected. Should inflationary pressures drive costs higher, the Company believes that general industry competitive price increases would sustain operating results, although there can be no assurance that this will be the case. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. -20- ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS Report of Independent Auditors F- 1 Consolidated Balance Sheets at December 29, 2001 And December 30, 2000 F- 2 Consolidated Statements of Operations for the years ended December 29, 2001, December 30, 2000, and January 1, 2000 F- 4 Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the years ended December 29, 2001, December 30, 2000, and January 1, 2000 F- 5 Consolidated Statements of Cash Flows for the years ended December 29, 2001, December 30, 2000, and January 1, 2000 F- 6 Notes to Consolidated Financial Statements F- 7 INDEX TO FINANCIAL STATEMENT SCHEDULES II. Valuation and Qualifying Accounts S-1 All other schedules have been omitted because they are not applicable or not required or because the required information is included in the consolidated financial statements or notes thereto. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable.
-21- PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth certain information with respect to the executive officers, directors and certain key personnel of Holding and its subsidiaries:
NAME AGE TITLE ENTITY --------------------------------- ----- ------------------------------------------ ------------------- Roberto Buaron(1)(4) 55 Chairman and Director Company and Holding Ira G. Boots(1)(4) 48 President, Chief Executive Officer, Company and Director President and Director Holding James M. Kratochvil 44 Executive Vice President, Chief Financial Company and Holding Officer, Treasurer and Secretary R. Brent Beeler 48 Executive Vice President and Company General Manager-Containers William J. Herdrich 52 Executive Vice President and Company General Manager-Closures Bruce J. Sims 52 Executive Vice President and Company General Manager-Consumer Products Joseph S. Levy(2)(3) 34 Vice President, Assistant Secretary Company and Holding and Director Lawrence G. Graev(2)(3) 57 Director Company and Holding Donald J. Hofmann, Jr.(1)(2)(3)(4) 44 Director Company and Holding Mathew J. Lori 38 Director Company and Holding David M. Clarke 51 Director Company and Holding
(1) Member of the Stock Option Committee of Holding. (2) Member of the Audit Committee of Holding. (3) Member of the Audit Committee of the Company. (4) Member of the Compensation Committee of the Company. -22- ROBERTO BUARON has been Chairman and a Director of the Company since it was organized in December 1990. He has also served as Chairman and a Director of Holding since 1990. He is the Chairman and Chief Executive Officer of First Atlantic Capital, Ltd. ("First Atlantic"), which he founded in 1989. From 1987 to 1989, he was an Executive Vice President with Overseas Partners, Inc., an investment management firm. From 1983 to 1986 he was First Vice President of Smith Barney, Inc., and a General Partner of First Century Partnership, its venture capital affiliate. Prior to 1983, he was a Principal at McKinsey & Company. IRA G. BOOTS has been President and Chief Executive Officer since June 2001, and a Director of the Company since April 1992. Prior to that, Mr. Boots served as Chief Operating Officer since August 2000 and Vice President of Operations, Engineering and Product Development of the Company since April 1992. Mr. Boots was employed by Old Berry from 1984 to December 1990 as Vice President, Operations. JAMES M. KRATOCHVIL has been Executive Vice President, Chief Financial Officer, Secretary and Treasurer of the Company since December 1997. He formerly served as Vice President, Chief Financial Officer and Secretary of the Company since 1991, and as Treasurer of the Company since May 1996. He was also promoted to Executive Vice President, Chief Financial Officer and Secretary of Holding in December 1997. He formerly served as Vice President, Chief Financial Officer and Secretary of Holding since 1991. Mr. Kratochvil was employed by Old Berry from 1985 to 1991 as Controller. R. BRENT BEELER has been Executive Vice President and General Manager - Containers of the Company since August 2000. Prior to that, Mr. Beeler was Executive Vice President, Sales and Marketing of the Company since February 1996 and Vice President, Sales and Marketing of the Company since December 1990. Mr. Beeler was employed by Old Berry from October 1988 to December 1990 as Vice President, Sales and Marketing. WILLIAM J. HERDRICH has been Executive Vice President and General Manager - Closures of the Company since August 2000. From May 2000 to August 2000, Mr. Herdrich was a consultant to the Company. From April 1994 to May 2000, Mr. Herdrich was President, Executive Vice President and General Manager of Poly-Seal Corporation. Mr. Herdrich was employed by Seaquist Closures from 1990 to April 1994 as Executive Vice President. BRUCE J. SIMS has been Executive Vice President and General Manager - Consumer Products of the Company since August 2000. He formerly served as Executive Vice President, Sales and Marketing, Housewares of the Company since January 1997. Prior to the PackerWare Acquisition, Mr. Sims served as President of PackerWare from March 1996 to January 1997 and as Vice President from October 1994 to March 1996. From January 1990 to October 1994 he was Vice President of the Miner Container Corporation, a national injection molder. JOSEPH S. LEVY has been Vice President and Assistant Secretary of the Company and Holding since April 1995. Mr. Levy has been a Director of Holding and the Company since April 1998. Mr. Levy has been Principal of First Atlantic since December 1999, and prior to that Mr. Levy had been a Vice President. LAWRENCE G. GRAEV has been a Director of the Company and Holding since August 1995. Mr. Graev is President and Chief Executive Officer of the GlenRock Group, LLC, a merchant banking firm, and Of Counsel to King & Spalding in its New York office. Prior to that, Mr. Graev was a Partner in the law firm O'Sullivan LLP of New York from 1974 until June 2001. DONALD J. HOFMANN, JR. has been a Director of Holding and the Company since June 1996. Mr. Hofmann has been a Partner of J.P. Morgan Partners, LLC (formerly Chase Capital Partners), a global private equity organization with over $20 billion under management, since September 1992. J.P. Morgan Partners provides equity and mezzanine debt financing for management buyouts and recapitalizations, growth equity and venture capital. Mr. Hofmann is also a director of Advanced Accessory Systems, LLC and Pliant Corporation. MATHEW J. LORI has been a Director of Holding and the Company since October 1996. Mr. Lori has been a Principal with J.P. Morgan Partners, LLC (formerly Chase Capital Partners) since January 1998, and prior to that, Mr. Lori had been an Associate since April 1996. From September 1993 to March 1996, he was an Associate in the Merchant Banking Group of The Chase Manhattan Bank, N.A. -23- DAVID M. CLARKE has been a Director of Holding and the Company since June 1996. Mr. Clarke is a Managing Director with Aetna Life Insurance Company, Private Equity and, prior to that, he had been a Vice President in the Investment Group of Aetna Life Insurance Company from 1988 to 1996. The Stockholders Agreement (as defined herein) contains provisions regarding the election of directors. See "Certain Relationships and Related Transactions - Stockholders Agreements." BOARD COMMITTEES The Board of Directors of Holding has an Audit Committee and a Stock Option Committee, and the Board of Directors of the Company has an Audit Committee and a Compensation Committee. The Audit Committees oversee the activities of the independent auditors and internal controls. The Stock Option Committee administers the BPC Holding Corporation 1996 Stock Option Plan. The Compensation Committee makes recommendations to the Board of Directors of the Company concerning salaries and incentive compensation for officers and employees of the Company. ITEM 11. EXECUTIVE COMPENSATION The following table sets forth a summary of the compensation paid by the Company to its Chief Executive Officer and the four other most highly compensated executive officers of the Company (collectively, the "Named Executive Officers") for services rendered in all capacities to the Company during fiscal 2001, 2000, and 1999. SUMMARY COMPENSATION TABLE
Long Term ANNUAL COMPENSATION COMPENSATION ------------------- ------------ Securities Fiscal Underlying Other NAME AND PRINCIPAL YEAR SALARY BONUS OPTIONS COMPENSATION(1) POSITION (#) ------------------------ -------- --------- -------- -------------- ---------------- Martin R. Imbler 2001 $208,522 $ 99,300 $ - $ 1,670 Former President and 2000 390,122 137,235 - 1,670 Chief Executive Officer 1999 362,940 121,201 - 1,620 (Retired) Ira G. Boots 2001 $316,461 $ 87,500 $ - $ 1,670 President and Chief 2000 289,328 150,000 - 1,670 Executive Officer 1999 251,163 95,486 - 1,620 James M. Kratochvil 2001 $ 231,919 $ 64,166 $ - $ 1,670 Executive Vice 2000 212,049 120,000 - 1,604 President, Chief 1999 200,894 80,083 - 1,620 Financial Officer, Treasurer and Secretary R. Brent Beeler 2001 $ 284,251 $ 78,750 $ - $ 1,670 Executive Vice 2000 257,236 135,000 - 1,670 President and General 1999 226,504 79,350 - 1,620 Manager - Containers William J. Herdrich 2001 $ 258,690 $ 62,800 $ - $ 1,670 Executive Vice 2000 99,003 18,986 - - President and General 1999 - - - - Manager - Closures
(1) Amounts shown reflect contributions by the Company under the Company's 401(k) plan. -24- FISCAL YEAR-END OPTION HOLDINGS The following table provides information on the number of exercisable and unexercisable management stock options held by the Named Executive Officers at December 29, 2001. FISCAL YEAR-END OPTION VALUES(1)
Number of Unexercised Value of Unexercised Options at In-the-Money Options Fiscal Year-End at Fiscal Year-End NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE ------- --------------------------- --------------------------- (#)(2) (2) Martin R. Imbler 6,778/0 $1,958,726/$0 Ira G. Boots 4,171/0 1,205,477/0 James M. Kratochvil 2,607/0 753,481/0 R. Brent Beeler 2,607/0 753,481/0 William J. Herdrich 667/1,333 108,721/217,279
(1) None of Holding's capital stock is currently publicly traded. The values reflect management's estimate of the fair market value of the Class B Nonvoting Common Stock at December 29, 2001. (2) All options granted to management of the Company are exercisable for shares of Class B Nonvoting Common Stock, par value $.01 per share, of Holding. DIRECTOR COMPENSATION Directors receive no cash consideration for serving on the Board of Directors of Holding or the Company, but directors are reimbursed for out- of-pocket expenses incurred in connection with their duties as directors. EMPLOYMENT AGREEMENTS The Company has a separation agreement with Mr. Imbler (the "Imbler Separation Agreement") that expires on December 31, 2003. Compensation under the Imbler Separation Agreement provides for monthly payments ranging from $17,212 to $34,424 plus a one-time payment of $158,695 on March 15, 2002. The Imbler Separation Agreement contains customary noncompetion, nondisclosure, and nonsolicitation provisions and provides for the use of his consulting services though May 31, 2002. The Company has employment agreements with each of Messrs. Boots, Kratochvil, Beeler, and Herdrich (each, an "Employment Agreement" and, collectively, the "Employment Agreements"). The agreements for Boots, Kratochvil and Beeler expire on January 1, 2007, and the agreement for Herdrich expires on December 31, 2003. The Employment Agreements provided for fiscal 2001 base compensation of $316,461, $231,919, $284,251 and $258,690, respectively. Salaries are subject in each case to annual adjustment at the discretion of the Compensation Committee of the Board of Directors of the Company. The Employment Agreements entitle each executive to participate in all other incentive compensation plans established for executive officers of the Company. The Company may terminate each Employment Agreement for "cause" or a "disability" (as such terms are defined in the Employment Agreements). If the Company terminates an executive's employment without "cause" or resignation for good cause following a change in control resulting in the executive's reassignment to an office greater than 25 miles from his or her current office location (as defined in the Employment Agreements, other than Mr. Herdrich for which the following compensation only applies upon termination without "cause"), the Employment Agreements require the Company to pay certain amounts to the terminated executive, including (i) the greater of (A) one year's salary or (B) 1/12 of one year's salary for each year (not to exceed 30 years in the aggregate) of employment with the Company (other than Mr. Herdrich, who would receive his salary for one year), and (ii) certain benefits under applicable incentive compensation plans. Each Employment Agreement also includes customary noncompetition, nondisclosure and nonsolicitation provisions. -25- COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Company established the Compensation Committee comprised of Messrs. Buaron, Boots, and Hofmann, in October 1996. The annual salary and bonus paid to Messrs. Boots, Kratochvil, Beeler, and Herdrich for fiscal 2001 were determined by the Compensation Committee in accordance with their respective employment agreements. All other compensation decisions with respect to officers of the Company are made by Mr. Boots pursuant to policies established in consultation with the Compensation Committee. The Company is party to an Amended and Restated Management Agreement (the "FACL Management Agreement") with First Atlantic pursuant to which First Atlantic provides the Company with financial advisory and management consulting services in exchange for an annual fee of $750,000 and reimbursement for out-of-pocket costs and expenses. In consideration of such services, the Company paid First Atlantic fees and expenses of $756,000 for fiscal 2001, $821,000 for fiscal 2000, and $792,000 for fiscal 1999. Under the FACL Management Agreement, the Company pays a fee for services rendered in connection with certain transactions equal to the lesser of (i) 1% of the total transaction value and (ii) $1,250,000 for any such transaction consummated plus out-of-pocket expenses in respect of such transaction, whether or not consummated. First Atlantic received advisory fees of approximately $690,000 in July 1999 for originating, structuring and negotiating the Cardinal Acquisition. First Atlantic received advisory fees of approximately $580,000 in May 2000 for originating, structuring and negotiating the Poly-Seal Acquisition. First Atlantic received advisory fees of $139,000 in March 2001 and $250,000 in June 2001 for originating, structuring and negotiating the Capsol and Pescor acquisitions, respectively. See "Certain Relationships and Related Transactions." Mr. Buaron, the Chairman and a director of Holding and the Company, is the Chairman and Chief Executive Officer of First Atlantic. Mr. Graev is a director of First Atlantic. As an officer and the sole stockholder of First Atlantic, Mr. Buaron is entitled to receive any bonuses paid and any dividends declared by First Atlantic on its capital stock, including any bonuses paid as a result of, and any dividends paid out of any of the fees paid with respect to the acquisitions described above. First Atlantic is engaged by Atlantic Equity Partners International II, L.P. ("International") to provide certain financial and management consulting services for which it receives annual fees. First Atlantic and International have completely distinct ownership and equity structures. See "Certain Relationships and Related Transactions." Atlantic Equity Partners, L.P. (the "Fund"), a prior stockholder of Holding, received in June 1996 approximately $67.6 million from the sale of its common stock in Holding and warrants to purchase common stock. First Atlantic is engaged by the Fund to provide certain financial and management consulting services for which it receives annual fees. First Atlantic and the Fund have completely distinct ownership and equity structures. Atlantic Equity Associates, L.P., a Delaware limited partnership ("AEA"), is the sole general partner of the Fund. Mr. Buaron is the sole shareholder of Buaron Capital Corporation ("Buaron Capital"). Buaron Capital is the managing and sole general partner of AEA. See "Certain Relationships and Related Transactions." STOCK OPTION PLAN Employees, directors and certain independent consultants of the Company and its subsidiaries are entitled to participate in the BPC Holding Corporation 1996 Stock Option Plan (the "Option Plan"), which provides for the grant of both "incentive stock options" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and stock options that are non-qualified under the Code. The total number of shares of Class B Nonvoting Common Stock of Holding for which options may be granted pursuant to the Option Plan is 76,620. The Option Plan will terminate on October 3, 2003 or such earlier date on which the Board of Directors of Holding, in its sole discretion, determines. The Stock Option Committee of the Board of Directors of Holding administers all aspects of the Option Plan, including selecting which of the Company's directors, employees and independent consultants will receive options, the time when options are granted, whether the options are incentive stock options or non-qualified stock options, the manner and timing for vesting of such options, the terms of such options, the exercise date of any options and the number of shares subject to such options. Directors who are also employees are eligible to receive options under the Option Plan. -26- The exercise price of incentive stock options granted by Holding under the Option Plan may not be less than 100% of the fair market value of the Class B Nonvoting Common Stock at the time of grant and the term of any option may not exceed seven years. With respect to any employee who owns stock representing more than 10% of the voting power of the outstanding capital stock of Holding, the exercise price of any incentive stock option may not be less than 110% of the fair market value of such shares at the time of grant and the term of such option may not exceed five years. The exercise price of a non-qualified stock option is determined by the Stock Option Committee on the date the option is granted. However, the exercise price of a non-qualified stock option may not be less than 100% of the fair market value of Class B Nonvoting Common Stock if the option is granted at any time after the initial public offering of such stock. Options granted under the Option Plan are nontransferable except by will and the laws of descent and distribution. Options granted under the Option Plan typically expire after seven years and vest over a five-year period based on timing as well as achieving financial performance targets. Under the Option Plan, as of December 29, 2001, there were outstanding options to purchase an aggregate of 60,420 shares of Class B Nonvoting Common Stock to 102 current and former employees of the Company, at an exercise price between $100 and $226 per share. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT STOCK OWNERSHIP All of the outstanding capital stock of the Company is owned by Holding. The following table sets forth certain information regarding the ownership of the capital stock of Holding with respect to (i) each person known by Holding to own beneficially more than 5% of the outstanding shares of any class of its voting capital stock, (ii) each of Holding's directors, (iii) the Named Executive Officers and (iv) all directors and executive officers of Holding as a group. Except as otherwise indicated, each of the stockholders has sole voting and investment power with respect to the shares beneficially owned. Unless otherwise indicated, the address for each stockholder is c/o Berry Plastics Corporation, 101 Oakley Street, Evansville, Indiana 47710.
SHARES OF SHARES OF VOTING NONVOTING COMMON STOCK(1) COMMON STOCK(1) ------------------- ------------------------- PERCENTAGE OF ALL CLASSES OF NAME AND ADDRESS PERCENTAGE OF COMMON STOCK OF CLASS CLASS VOTING CLASS A CLASS B CLASS C (FULLY-DILUTED) BENEFICIAL OWNER A B COMMON STOCK ----------------------------------------------------------------------------------------------------- Atlantic Equity Partners International II, L.P.(2) 7,800 128,142 55.5% 2,200 3,385 11,470 21.3% J.P. Morgan Partners (SBIC),LLC(3) 52,000 5,623(4) 23.5 168,000 33,436(4) - 36.1 BPC Equity, LLC(5) 31,200 - 12.7 88,800 - - 16.7 Roberto Buaron(6) 7,800 128,142 55.5 2,200 3,385 11,470 21.3 Martin R. Imbler - 3,629 1.5 - 15,915(7) 664 2.2 Joseph S. Levy(8) - 42 * - 118 14 * Lawrence G. Graev(9) - - - - - - - Donald J. Hofmann, Jr.(10) 52,000 5,623(4) 23.5 168,000 33,436(4) - 36.1 Mathew J. Lori(11) 52,000 5,623(4) 23.5 168,000 33,436(4) - 36.1 David M. Clarke(12) 31,200 - 12.7 88,800 - - 16.7 Ira G. Boots - 1,718 * - 5,889(13) - * James M. Kratochvil - 1,196 * - 6,011(14) 391 * R. Brent Beeler - 1,196 * - 6,011(15) 391 * William J. Herdrich - - * - 767(16) - * All executive officers and 91,000 137,917 93.5 259,000 73,227 12,930 80.0 directors as a group (11 persons)
* Less than one percent. -27- (1) The authorized capital stock of Holding consists of 4,814,000 shares of capital stock, including 2,500,000 shares of Common Stock, $.01 par value (the "Holding Common Stock"), and 2,314,000 shares of Preferred Stock, $.01 par value (the "Preferred Stock"). Of the 2,500,000 shares of Holding Common Stock, 500,000 shares are designated Class A Voting Common Stock, 500,000 shares are designated Class A Nonvoting Common Stock, 500,000 shares are designated Class B Voting Common Stock, 500,000 shares are designated Class B Nonvoting Common Stock, and 500,000 shares are designated Class C Nonvoting Common Stock. Of the 2,314,000 shares of Preferred Stock, 600,000 shares are designated Series A Senior Cumulative Exchangeable Preferred Stock, 1,400,000 shares are designated Series A-1 Preferred Stock, 200,000 shares are designated Series B Cumulative Preferred Stock, 3,063 shares are designated Series C-1 Preferred Stock, 1,910 shares are designated Series C-2 Preferred Stock, 2,135 shares are designated Series C-3 Preferred Stock, 3,033 shares are designated Series C-4 Preferred Stock, 3,027 shares are designated Series C-5 Preferred Stock, and 100,000 shares are designated Series D Preferred Stock. (2) Address is P. O. Box 847, One Capital Place, Fourth Floor, Grand Cayman, Cayman Islands, British West Indies. Atlantic Equity Associates International II, L.P., a Delaware limited partnership ("AEA II"), is the sole general partner of International and as such exercises voting and/or investment power over shares of capital stock owned by International, including the shares of Holding Common Stock held by International (the "International Shares"). Mr. Buaron is the sole shareholder of Buaron Holdings Ltd. ("BHL"). BHL is the sole general partner of AEA II. As the general partner of AEA II, BHL may be deemed to beneficially own the International Shares. BHL disclaims any beneficial ownership of any shares of capital stock owned by International, including the International Shares. Through his affiliation with BHL and AEA II, Mr. Buaron controls the sole general partner of International and therefore has the authority to control voting and/or investment power over, and may be deemed to beneficially own, the International Shares. Mr. Buaron disclaims any beneficial ownership of any of the International Shares. (3) Address is 1221 Avenue of the Americas, New York, New York 10020. (4) Represents warrants to purchase such shares of common stock held by J.P. Morgan Partners (SBIC), LLC (formerly Chase Venture Capital Associates, LLC) ("JPMP(SBIC)") which are currently exercisable. (5) Address is c/o Aetna Life Insurance Company, Private Equity Group, IG6U, 151 Farmington Avenue, Hartford, Connecticut 06156. Aetna Life Insurance Company exercises voting and/or investment power over shares of capital stock owned by BPC Equity, LLC ("BPC Equity"), including shares of Holding Common Stock held by BPC Equity. (6) Address is c/o First Atlantic Capital, Ltd., 135 East 57th Street, New York, New York 10022. Represents shares of Holding Common Stock owned by International. Mr. Buaron is the sole shareholder of BHL. BHL is the sole general partner of AEA II. AEA II is the sole general partner of International and as such, exercises voting and/or investment power over shares of capital stock owned by International, including the International Shares. Mr. Buaron, as the sole shareholder and Chief Executive Officer of BHL, controls the sole general partner of International and therefore has voting and/or investment power over, and may be deemed to beneficially own, the International Shares. Mr. Buaron disclaims any beneficial ownership of the International Shares. (7) Includes 6,778 options granted to Mr. Imbler, which are presently exercisable. (8) Address is c/o First Atlantic Capital, Ltd., 135 East 57th Street, New York, New York 10022. (9) Address is c/o King & Spalding, 1185 Avenue of the Americas, New York, New York 10036. (10) Address is c/o J.P. Morgan Partners, 1221 Avenue of the Americas, New York, New York 10020. Represents shares owned by JPMP(SBIC). Mr. Hofmann is a General Partner of J.P. Morgan Partners, LLC, which is the private equity investment arm of J.P. Morgan Chase & Co., which is an affiliate of JPMP(SBIC). Mr. Hofmann disclaims any beneficial ownership of the shares of Holding Common Stock held by JPMP(SBIC). (11) Address is c/o J.P. Morgan Partners, LLC, 1221 Avenue of the Americas, New York, New York 10020. Represents shares owned by JPMP(SBIC). Mr. Lori is a Principal with of J.P. Morgan Partners, which is the private equity investment arm of J.P. Morgan Chase & Co., which is an affiliate of JPMP(SBIC). Mr. Lori disclaims any beneficial ownership of the shares of Holding Common Stock held by JPMP(SBIC). (12) Address is c/o Aetna Life Insurance Company, Private Equity Group, IG6U, 151 Farmington Avenue, Hartford, Connecticut 06156. Represents shares owned by BPC Equity. Mr. Clarke is a Managing Director of Aetna, Inc., an affiliate of Aetna Life Insurance Company, which is a member of BPC Equity. Mr. Clarke disclaims any beneficial ownership of the shares of Holding Common Stock held by BPC Equity. (13) Includes 4,171 options granted to Mr. Boots, which are currently exercisable. (14) Includes 2,607 options granted to Mr. Kratochvil, which are currently exercisable. (15) Includes 2,607 options granted to Mr. Beeler, which are currently exercisable. (16) Includes 667 options granted to Mr. Herdrich, which are currently exercisable. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS FIRST ATLANTIC Pursuant to the FACL Management Agreement, First Atlantic provides the Company with financial advisory and management consulting services in exchange for an annual fee of $750,000 and reimbursement for out-of-pocket costs and expenses. In consideration of such services, the Company paid First Atlantic fees and expenses of approximately $756,000 for fiscal 2001, $821,000 for fiscal 2000, and $792,000 for fiscal 1999. Under the FACL Management Agreement, the Company pays a fee for services rendered in connection with certain transactions equal to the lesser of (i) 1% of the total transaction value and (ii) $1,250,000 for any such transaction consummated plus out-of-pocket expenses in respect of such transaction, whether or not consummated. First Atlantic received advisory fees of approximately $690,000 in July 1999 for originating, structuring and negotiating the Cardinal Acquisition. First Atlantic received advisory fees of approximately $580,000 in May 2000 for originating, structuring and negotiating the Poly-Seal Acquisition. First Atlantic received advisory fees of approximately $139,000 in March 2001 and $250,000 in June 2001 for originating, structuring and negotiating the Capsol and Pescor acquisitions, respectively. Mr. Buaron, the Chairman and a director of Holding and the Company, is the Chairman and Chief Executive Officer of First Atlantic. As an officer and the sole stockholder of First Atlantic, Mr. Buaron is entitled to receive any bonuses paid and any dividends declared by First Atlantic on its capital stock, including any bonuses paid as a result of, and any dividends paid out of the fees paid with respect to the acquisitions described above. Mr. Graev is also a director of First Atlantic, and Mr. Levy is an officer of First Atlantic. First Atlantic is engaged by International to provide certain financial and management consulting services for which it receives annual fees. First Atlantic and International have completely distinct ownership and equity structures. -28- Atlantic Equity Partners, L.P. (the "Fund"), a prior stockholder of Holding, received in June 1996 approximately $67.6 million from the sale of its common stock in Holding and warrants to purchase common stock. First Atlantic is engaged by the Fund to provide certain financial and management consulting services for which it receives annual fees. First Atlantic and the Fund have completely distinct ownership and equity structures. AEA is the sole general partner of the Fund. Mr. Buaron is the sole shareholder of Buaron Capital, and Buaron Capital is the managing and sole general partner of AEA. STOCKHOLDERS AGREEMENTS Holding entered into a Stockholders Agreement dated as of June 18, 1996, as amended (the "Stockholders Agreement"), with certain common equity investors ("Common Stock Purchasers"), certain Management Stockholders (as defined herein) and, for limited purposes thereunder, the Northwestern Mutual Life Insurance Company ("Northwestern") and JPMP(SBIC) ("Preferred Stock Purchasers"). The Stockholders Agreement grants the Common Stock Purchasers certain rights and obligations, including the following: (i) until the occurrence of certain events specified in the Stockholders Agreement, to designate the members of a seven person Board of Directors as follows: (A) one director will be Roberto Buaron or his designee; (B) International will have the right to designate three directors (who are currently Messrs. Graev, Imbler and Levy); (C) JPMP(SBIC) will have the right to designate two directors (who are currently Messrs. Hofmann and Lori); and (D) the institutional holders (excluding International and JPMP(SBIC)) will have the right to designate one director (who is currently Mr. Clarke); (ii) in the case of certain Common Stock Purchasers, to subscribe for a proportional share of future equity issuances by Holding; (iii) under certain circumstances and in the case of International or JPMP(SBIC), to cause the initial public offering of equity securities of Holding or a sale of Holding subsequent to June 18, 2001 and (iv) under certain circumstances and in the case of a majority in interest of the institutional holders, to cause the initial public offering of equity securities of Holding or a sale of Holding subsequent to June 18, 2002. Provisions under the Stockholders Agreement also (i) prohibit Holding from taking certain actions without the consent of holders of a majority of voting stock held by JPMP(SBIC) and the institutional holders other than International (or, following the occurrence of certain events, International's consent), including certain transactions between Holding and any subsidiary, on the one hand, and First Atlantic or any of its affiliates, on the other hand; (ii) obligate Holding to provide certain Common Stock Purchasers with financial and other information regarding Holding and to provide access and inspection rights to all Common Stock Purchasers; and (iii) restrict transfers of equity by the Common Stock Purchasers, subject to certain exceptions (including for transfers of up to 10% of the equity (including warrants to purchase equity) held by each Common Stock Purchaser on the date of the Stockholders Agreement). Pursuant to the Stockholders Agreement, under certain circumstances the Preferred Stock Purchasers (and their transferees) have tag-along rights with respect to the warrants issued by Holding in 1996 and the Holding Common Stock issuable upon exercise thereof. Under specified circumstances and subject to certain exceptions, the Preferred Stock Purchasers (and their transferees) are entitled to include a pro rata share of their Preferred Stock in a transaction (or series of related transactions) involving the transfer by International, JPMP(SBIC) and the Institutional Holders (as defined in the Stockholders Agreement) of more than 50% of the aggregate amount of securities held by them on June 19, 1996. The Stockholders Agreement grants registration rights, under certain circumstances and subject to specified conditions, to the Common Stock Purchasers. International and JPMP(SBIC) each have the right, on three occasions, to demand registration, at Holding's expense, of their shares of Holding Common Stock. Under certain circumstances, a majority in interest of the institutional holders (excluding International and JPMP(SBIC)) have the right, on one occasion, to demand registration, at Holding's expense, of their shares of Holding Common Stock. The Stockholders Agreement provides that if Holding proposes to register any of its securities, either for its own account or for the account of other stockholders, Holding will be required to notify all Common Stock Purchasers and to include in such registration the shares of Holding Common Stock requested to be included by them. All shares of Holding Common Stock owned by the Common Stock Purchasers requested to be included in a registration will be subject to cutbacks under certain circumstances in connection with an underwritten public offering. -29- The provisions of the Stockholders Agreement regarding voting rights, negative covenants, information/inspection rights, the right to force a sale of Holding, preemptive rights and transfer restrictions generally will expire on the earlier to occur of (i) the later of (A) June 18, 2001 if an underwritten public offering of equity securities of Holding resulting in gross proceeds of at least $20.0 million occurs prior to June 18, 2001 and (B) the occurrence of such underwritten public offering that occurs subsequent to June 18, 2001; (ii) June 18, 2016; and (iii) a sale of Holding. In addition, the Stockholders Agreement provides that certain rights of a Common Stock Purchaser (to the extent such rights apply to such Common Stock Purchaser) to designate members of the Board of Directors of Holding and/or to approve certain actions by Holding will terminate if certain circumstances occur. Holding is also party to the Amended and Restated Stockholders Agreement dated June 18, 1996 (the "Management Stockholders Agreement"), with International and all management shareholders including, among others, Messrs. Imbler, Boots, Kratochvil, Beeler, and Herdrich (collectively, the "Management Stockholders"). The Management Stockholders Agreement contains provisions (i) limiting transfers of equity by the Management Stockholders; (ii) requiring the Management Stockholders to sell their shares as designated by Holding or International upon the consummation of certain transactions; (iii) granting the Management Stockholders certain rights of co-sale in connection with sales by International; (iv) granting Holding rights to repurchase capital stock from the Management Stockholders upon the occurrence of certain events; and (v) requiring the Management Stockholders to offer shares to Holding prior to any permitted transfer. In order to finance a portion of the consideration delivered in connection with the acquisition of Poly-Seal Corporation, Holding issued, pursuant to a Preferred Stock and Warrant Purchase Agreement dated as of May 9, 2000 (the "Preferred Agreement") by and among Holding, JPMP(SBIC), and Northwestern, 1,000,000 shares of Series A-1 Preferred Stock in a private placement (the "Preferred Placement") for an aggregate purchase price of $25 million. The Series A-1 Preferred Stock has a stated value of $25 per share, and dividends accrue at a rate of 14% per annum and will accumulate until declared and paid. The Series A-1 Preferred Stock ranks pari-passu with the Series A Preferred Stock and prior to all other capital stock of Holding. In connection with the Preferred Placement, Holding issued warrants to purchase 25,997 shares of its Series B Non-Voting Common Stock at $0.01 per share. Holding also extended the expiration period of currently outstanding warrants to purchase Series B Non-Voting Common Stock and Series B Voting Common Stock held by JPMP(SBIC) and Northwestern to May 9, 2010. The Series A-1 Preferred Stock and Warrants were issued in transactions exempt from registration in reliance on the exemption provided by Section 4 (2) of the Securities Act of 1933. TAX SHARING AGREEMENT For federal income tax purposes, Berry and its domestic subsidiaries are included in the affiliated group of which Holding is the common parent and as a result, the federal taxable income and loss of Berry and its subsidiaries is included in the group consolidated tax return filed by Holding. In April 1994, Holding, Berry and certain of its subsidiaries entered into a tax sharing agreement, which was amended and restated in March 2001 (the "Tax Sharing Agreement"). Under the Tax Sharing Agreement, for fiscal 1994 and all taxable years thereafter for which the Tax Sharing Agreement remains in effect, Berry and its subsidiaries as a consolidated group are required to pay at the request of Holding an amount equal to the taxes (plus any accrued interest) that they would otherwise have to pay if they were to file separate federal, state or local income tax returns (including any amounts determined to be due as a result of a redetermination arising from an audit or otherwise of a tax liability which is attributable to them). If Berry and its subsidiaries would have been entitled to a tax refund for taxes paid previously on the basis computed as if they were to file separate returns, then under the Tax Sharing Agreement, Holding is required to pay at the request of Berry and its subsidiaries an amount equal to such tax refund. If, however, Berry and its subsidiaries would have reported a tax loss if they were to file separate returns, then Holdings intends, but is not obligated under the Tax Sharing Agreement, to pay to Berry and its subsidiaries an amount equal to the tax benefit that is realized by Holding as a result of such separate loss. Under the Tax Sharing Agreement any such payments to be made by Holding to Berry or any of its subsidiaries on account of a tax loss are within the sole discretion of Holding. Berry and its subsidiaries made a $8.5 million payment to Holding in December 2001 under this tax sharing agreement. -30- PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Documents Filed as Part of the Report 1. FINANCIAL STATEMENTS The financial statements listed under Item 8 are filed as part of this report. 2. FINANCIAL STATEMENT SCHEDULES The financial statement schedule listed under Item 8 is filed as part of this report. Schedules other than the above have been omitted because they are either not applicable or the required information has been disclosed in the financial statements or notes thereto. 3. EXHIBITS The exhibits listed on the accompanying Exhibit Index are filed as part of this report. (b) Reports on Form 8-K None. -31- REPORT OF INDEPENDENT AUDITORS The Stockholders and Board of Directors BPC Holding Corporation We have audited the accompanying consolidated balance sheets of BPC Holding Corporation ("Holding") as of December 29, 2001, and December 30, 2000, and the related consolidated statements of operations, changes in stockholders' equity (deficit) and cash flows for each of the three years in the period ended December 29, 2001. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of Holding's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of BPC Holding Corporation at December 29, 2001 and December 30, 2000, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 29, 2001, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein. /S/ ERNST & YOUNG LLP Indianapolis, Indiana February 15, 2002 F-1 BPC HOLDING CORPORATION CONSOLIDATED BALANCE SHEETS (IN THOUSANDS OF DOLLARS)
DECEMBER 29, DECEMBER 30, 2001 2000 ------------- ------------ ASSETS Current assets: Cash and cash equivalents $ 1,232 $ 2,054 Accounts receivable (less allowance for doubtful accounts of $2,070 at December 29, 2001 and $1,724 at December 30, 2000) 48,623 48,397 Inventories: Finished goods 43,048 38,157 Raw materials and supplies 13,009 10,822 ------------- ------------ 56,057 48,979 Prepaid expenses and other receivables 5,280 5,272 ------------- ------------ Total current assets 111,192 104,702 Property and equipment: Land 9,443 8,894 Buildings and improvements 72,722 60,572 Machinery, equipment and tooling 201,357 203,569 Construction in progress 22,647 16,901 ------------- ------------ 306,169 289,936 Less accumulated depreciation 102,952 110,132 ------------- ------------ 203,217 179,804 Intangible assets: Deferred financing fees, net 8,475 10,422 Covenants not to compete, net 1,955 3,388 Excess of cost over net assets acquired, net 119,923 114,680 ------------- ------------ 130,353 128,490 Other 2,114 126 ------------- ------------ Total assets $ 446,876 $ 413,122 ============= ============
F-2 CONSOLIDATED BALANCE SHEETS (CONTINUED)
DECEMBER 29, DECEMBER 30, 2001 2000 ------------- ------------ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable $ 34,862 $ 26,779 Accrued expenses and other liabilities 8,955 10,430 Accrued interest 7,964 9,006 Employee compensation and payroll taxes 17,792 14,785 Current portion of long-term debt 22,292 23,232 ------------- ------------ Total current liabilities 91,865 84,232 Long-term debt, less current portion 463,589 445,574 Accrued dividends on preferred stock 27,446 17,656 Deferred income taxes 489 491 Other liabilities 3,088 3,166 ------------- ------------ Total liabilities 586,477 551,119 Stockholders' equity (deficit): Series A Preferred Stock; 600,000 shares authorized, issued and outstanding (net of discount of $1,893 at December 29, 2001 and $2,185 at December 30, 2000) 12,678 12,386 Series A-1 Preferred Stock; 1,400,000 shares authorized; 1,000,000 shares issued and outstanding (net of discount of $4,668 at December 29, 2001 and $5,400 at December 30, 2000) 20,332 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 9,779 - 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 25,315 35,041 Warrants 9,386 9,386 Retained earnings (deficit) (220,263) (218,168) Accumulated other comprehensive income (loss) (1,429) (843) ------------- ------------ Total stockholders' equity (deficit) (139,601) (137,997) ------------- ------------ Total liabilities and stockholders' equity (deficit) $ 446,876 $ 413,122 ============= ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. F-3 BPC HOLDING CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS OF DOLLARS)
YEAR ENDED --------------------------------------- DECEMBER 29, DECEMBER 30, JANUARY 1, 2001 2000 2000 ------------- ------------ ------------ Net sales $ 461,659 $ 408,088 $ 328,834 Cost of goods sold 338,000 312,119 241,067 ------------- ------------ ------------ Gross margin 123,659 95,969 87,767 Operating expenses: Selling 21,996 21,630 17,383 General and administrative 28,535 24,408 22,034 Research and development 1,948 2,606 2,338 Amortization of intangibles 12,802 10,579 7,215 Other expenses 4,911 6,639 5,148 ------------- ------------ ------------ Operating income 53,467 30,107 33,649 Other expenses: Loss on disposal of property and equipment 473 877 1,416 ------------- ------------ ------------ Income before interest and taxes 52,994 29,230 32,233 Interest: Expense (54,397) (51,553) (41,040) Income 42 96 223 ------------- ------------ ------------ Loss before income taxes and extraordinary item (1,361) (22,227) (8,584) Income taxes (benefit) 734 (142) 554 ------------- ------------ ------------ Loss before extraordinary item (2,095) (22,085) (9,138) Extraordinary item (less applicable income taxes of $0) - (1,022) - ------------- ------------ ------------ Net loss (2,095) (23,107) (9,138) Preferred stock dividends (9,790) (6,655) (3,776) Amortization of preferred stock discount (1,024) (768) (292) ------------- ------------ ------------ Net loss attributable to common shareholders $ (12,909) $ (30,530) $ (13,206) ============= ============ ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. F-4 BPC HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) (IN THOUSANDS OF DOLLARS) COMMON STOCK PREFERRED STOCK ------------------------ ----------------------------- CLASS CLASS CLASS CLASS CLASS CLASS CLASS TREASURY A B C A A-1 B C STOCK -------------------------------------------------------------------------- Balance at January 2, 1999 $ 4 $ 2 $ - $ 11,801 $ - $ 5,000 $ - $ (280) -------- -------- -------- -------- -------- -------- --------- --------- Net loss - - - - - - - - Sale of treasury stock - - - - - - - 40 to management Purchase treasury stock - - - - - - - (16) from management Translation loss - - - - - - - - Accrued dividends - - - - - - - - on preferred stock Amortization of - - - 292 - - - - preferred stock discount -------- -------- -------- -------- -------- -------- --------- --------- Balance at January 1, 2000 4 2 - 12,093 - 5,000 - (256) -------- -------- -------- -------- -------- -------- --------- --------- Net loss - - - - - - - - Purchase treasury - - - - - - - (149) stock from management Translation loss - - - - - - - - Stock-based - - - - - - - - compensation Issuance of - - - - 25,000 - - - preferred stock Issuance of - - - - (5,875) - - - private warrants Accrued dividends - - - - - - - - on preferred stock Amortization - - - 293 475 - - - of preferred stock discount -------- -------- -------- -------- -------- -------- --------- --------- Balance at December 30, 2000 4 2 - 12,386 19,600 5,000 - (405) -------- -------- -------- -------- -------- -------- --------- --------- Net loss - - - - - - - - Translation loss - - - - - - - - Stock-based - - - - - - - - compensation Issuance of - - - - - - 9,779 - preferred stock Issuance of - - - - - - - - common stock Accrued dividends - - - - - - - - on preferred stock Amortization - - - 292 732 - - - of preferred stock discount -------- -------- -------- -------- -------- -------- --------- --------- Balance at December 29, 2001 $ 4 $ 2 $ - $12,678 $20,332 $5,000 $9,779 $(405) ======== ======== ======== ======== ======== ======== ======== ========= ACCUMULATED ADDITIONAL RETAINED OTHER COMPREHENSIVE PAID-IN EARNINGS COMPREHENSIVE TOTAL INCOME CAPITAL WARRANTS (DEFICIT) LOSS (LOSS) -------------------------------------------------------------------------- Balance at January 2, 1999 $ 45,611 $ 3,511 $ (185,923) $ (83) $ (120,357) --------- ----------- ---------- ----------- ------------- --------- Net loss - - (9,138) - (9,138) (9,138) Sale of treasury stock 16 - - - 56 - to management Purchase treasury stock - - - - (16) - from management Translation loss - - - (240) (240) (240) Accrued dividends (3,776) - - - (3,776) - on preferred stock Amortization of (292) - - - - - preferred stock discount ---------- ---------- ---------- ----------- ----------- --------- Balance at January 1, 2000 41,559 3,511 (195,061) (323) (133,471) (9,378) ---------- ---------- ---------- ----------- ----------- ========= Net loss - - (23,107) - (23,107) $(23,107) Purchase treasury - - - - (149) - stock from management Translation loss - - - (520) (520) (520) Stock-based 905 - - - 905 - compensation Issuance of - - - - 25,000 - preferred stock Issuance of - 5,875 - - - - private warrants Accrued dividends (6,655) - - - (6,655) - on preferred stock Amortization (768) - - - - - of preferred stock discount ---------- ---------- ---------- ----------- ----------- --------- Balance at December 30, 2000 35,041 9,386 (218,168) (843) (137,997) (23,627) ---------- ---------- ---------- ----------- ----------- ========= Net loss - - (2,095) - (2,095) (2,095) Translation loss - - - (586) (586) (586) Stock-based 796 - - - 796 - compensation Issuance of - - - - 9,779 - preferred stock Issuance of 292 - - - 292 - common stock Accrued dividends (9,790) - - - (9,790) - on preferred stock Amortization (1,024) - - - - - of preferred stock discount ---------- --------- ---------- ----------- ----------- --------- Balance at December 29, 2001 $25,315 $ 9,386 $(220,263) $(1,429) $(139,601) $(2,681) ========== ========== ========== =========== =========== =========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. F-5 CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS OF DOLLARS)
YEAR ENDED ---------------------------------------------- DECEMBER 29, DECEMBER 30, JANUARY 1, 2001 2000 2000 --------------- --------------- -------------- OPERATING ACTIVITIES Net loss $(2,095) $ (23,107) $(9,138) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 38,105 31,569 24,580 Non-cash interest expense 11,268 18,047 15,567 Amortization 12,802 10,579 7,215 Non-cash compensation 796 905 - Write-off of financing fees - 1,022 - Loss on sale of property and equipment 473 877 1,416 Deferred income taxes - (349) 6 Changes in operating assets and liabilities: Accounts receivable, net 2,869 (1,475) (723) Inventories (4,017) 7,383 (7,746) Prepaid expenses and other receivables (50) (1,163) (529) Other assets (2,000) - 493 Accounts payable and accrued expenses (3,803) (8,182) 4,860 --------------- --------------- -------------- Net cash provided by operating activities 54,348 36,106 36,001 INVESTING ACTIVITIES Additions to property and equipment (32,834) (31,530) (30,738) Proceeds from disposal of property and 93 1,666 529 equipment Acquisitions of businesses (23,549) (78,851) (76,769) --------------- --------------- -------------- Net cash used for investing activities (56,290) (108,715) (106,978) FINANCING ACTIVITIES Proceeds from long-term borrowings 15,606 80,032 90,435 Payments on long-term borrowings (24,088) (31,543) (16,340) Purchase of treasury stock from management - (149) (16) Proceeds from issuance of preferred stock 9,779 25,000 - and warrants Proceeds from issuance of treasury stock - - 56 Proceeds from issuance of common stock 292 - - Debt issuance costs (1,009) (1,303) (3,000) --------------- --------------- -------------- Net cash provided by financing activities 580 72,037 71,135 Effect of exchange rate changes on cash 540 80 70 --------------- --------------- -------------- Net increase (decrease) in cash and cash (822) (492) 228 equivalents Cash and cash equivalents at beginning of 2,054 2,546 2,318 year --------------- --------------- -------------- Cash and cash equivalents at end of year $ 1,232 $ 2,054 $2,546 =============== =============== ============== SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-6 BPC HOLDING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS OF DOLLARS, EXCEPT AS OTHERWISE NOTED) NOTE 1. ORGANIZATION BPC Holding Corporation ("Holding"), through its subsidiary Berry Plastics Corporation ("Berry" or the "Company") and its 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 S.p.a. and Ociesse S.r.l., and Pescor, Inc. manufactures and markets plastic packaging products through its facilities located in Evansville, Indiana; Henderson, Nevada; Iowa Falls, Iowa; Charlotte, North Carolina; Suffolk, Virginia; Lawrence, Kansas; Monroeville, Ohio; Norwich, England; Woodstock, Illinois; Streetsboro, Ohio; Baltimore, Maryland; Milan, Italy, and Fort Worth, Texas. In connection with the acquisition of CPI Holding Corporation in July 1999, the Company acquired manufacturing facilities in Ontario, California and Minneapolis, Minnesota. The Ontario facility was closed in 1999, and all production was removed from the Minneapolis facility in 2000. Also in 2000, the Company closed its manufacturing facility in York, Pennsylvania. The business from these closed locations has been distributed throughout Berry's facilities. Holding's fiscal year is a 52/53 week period ending generally on the Saturday closest to December 31. All references herein to "2001," "2000," and "1999," relate to the fiscal years ended December 29, 2001, December 30, 2000, and January 1, 2000, respectively. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONSOLIDATION AND BUSINESS The consolidated financial statements include the accounts of Holding and its subsidiaries, all of which are wholly owned. Intercompany accounts and transactions have been eliminated in consolidation. Holding, through its wholly owned subsidiaries, operates in three primary segments: containers, closures, and consumer products. The Company's customers are located principally throughout the United States, without significant concentration in any one region or with any one customer. The Company performs periodic credit evaluations of its customers' financial condition and generally does not require collateral. Purchases of various densities of plastic resin used in the manufacture of the Company's products aggregated approximately $110.5 million in 2001. Dow Chemical Corporation is the largest supplier (approximately 31%) of the Company's total resin material requirements. The Company also uses other suppliers such as Chevron, ExxonMobil, Nova and Equistar to meet its resin requirements. The Company does not anticipate any material difficulty in obtaining an uninterrupted supply of raw materials at competitive prices in the near future. However, should a significant shortage of the supply of resin occur, changes in both the price and availability of the principal raw material used in the manufacture of the Company's products could occur and result in financial disruption to the Company. The Company is subject to existing and potential federal, state, local and foreign legislation designed to reduce solid waste in landfills. While the principal resins used by the Company are recyclable and, therefore, reduce the Company's exposure to legislation promulgated to date, there can be no assurance that future legislation or regulatory initiatives would not have a material adverse effect on the Company. Legislation, if promulgated, requiring plastics to be degradable in landfills or to have minimum levels of recycled content would have a significant impact on the Company's business as would legislation providing for disposal fees or limiting the use of plastic products. F-7 CASH AND CASH EQUIVALENTS All highly liquid investments with a maturity of three months or less at the date of purchase are considered to be cash equivalents. INVENTORIES Inventories are valued at the lower of cost (first in, first out method) or market. PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Depreciation is computed primarily by the straight-line method over the estimated useful lives of the assets ranging from three to 25 years. INTANGIBLE ASSETS Origination fees and deferred financing fees are being amortized using the straight-line method over the lives of the respective debt agreements. Covenants not to compete are being amortized using the straight-line method over the respective lives of the agreements ranging from one to five years. The costs in excess of net assets acquired represent the excess purchase price over the fair value of the net assets acquired in the original acquisition of Berry Plastics and subsequent acquisitions. These costs are being amortized using the straight-line method over a range of 15 to 20 years. LONG-LIVED ASSETS Holding evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable based on expected undiscounted cash flows attributed to that asset. The amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. Holding does not have any long-lived assets it considers to be impaired. Revenue Recognition Revenue from sales of products is recognized at the time product is shipped to the customer. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. F-8 IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS The Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES ("SFAS No. 133"), which the Company adopted at the beginning of fiscal 2001. This pronouncement establishes accounting and reporting standards for derivative financial instruments and hedging activities. SFAS No. 133 requires, among other things, the Company to recognize all derivatives as either assets or liabilities on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in its fair value will either be offset against the change in fair value of the hedged assets, liabilities, or firm commitments through income or recognized in accumulated other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. The adoption of SFAS No. 133 did not have a material effect on the earnings and financial position of the Company. In June 2001, the FASB issued SFAS No. 141, BUSINESS COMBINATIONS and SFAS No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS. These pronouncements significantly change the accounting for business combinations, goodwill, and intangible assets. SFAS No. 141 eliminates the pooling-of-interests method of accounting for business combinations and further clarifies the criteria to recognize intangible assets separately from goodwill. The requirements of SFAS No. 141 are effective for any business combination that is completed after June 30, 2001. SFAS No. 142 states goodwill and indefinite lived intangible assets are no longer amortized but are reviewed for impairment annually (or more frequently if impairment indicators arise). Separable intangible assets that are deemed to have an indefinite life will continue to be amortized over their useful lives. The Company will adopt the provisions of SFAS Nos. 141 and 142 as of the beginning of fiscal 2002. Application of the nonamortization provisions of SFAS No. 142 is expected to result in an increase in net income (or decrease in net loss) of approximately $10.5 million per year based on goodwill related to acquisitions prior to the new rules. Further, during fiscal year 2002, the Company will perform the first of the required impairment tests of goodwill and indefinite lived intangible assets and has not yet determined the impact of the results of these tests on the earnings and financial position of the Company. 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. In October 2001, the FASB issued SFAS No. 144, ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS. This statement addresses the financial accounting and reporting for the impairment and disposal of long- lived assets. It supercedes and addresses significant issues relating to the implementation of SFAS No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG- LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF. SFAS No. 144 retains many of the fundamental provisions of SFAS No. 121 and establishes a single accounting model, based on the framework established in SFAS No. 121, for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired. The Company will adopt this standard as of the beginning of fiscal 2002. The application of SFAS No. 144 is not expected to have a material impact on the Company's results of operations and financial position. NOTE 3. 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. F-9 On May 14, 2001, Berry acquired all of the outstanding capital stock of Pescor Plastics, Inc. ("Pescor") for aggregate consideration of approximately $24.8 million. The purchase was financed through the issuance by Holding of $9.8 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 at the beginning of each fiscal year presented.
YEAR ENDED ------------------------------- DECEMBER 29, DECEMBER 30, 2001 2000 --------------- --------------- Pro forma net sales $ 474,112 $ 459,657 Pro forma loss before extraordinary (2,663) (29,603) item Pro forma net loss (2,663) (30,625)
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 dates, 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. NOTE 4. INTANGIBLE ASSETS Intangible assets consist of the following:
DECEMBER 29, DECEMBER 30, 2001 2000 ------------- ------------ Deferred financing fees $ 20,894 $19,621 Covenants not to compete 7,376 9,997 Excess of cost over net assets acquired 146,494 131,775 Accumulated amortization (44,411) (32,903) ------------- ------------ $130,353 $128,490 ============= ============
Excess of cost over net assets acquired increased primarily due to the acquisition of Pescor in 2001. F-10 NOTE 5. LONG-TERM DEBT Long-term debt consists of the following:
DECEMBER 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 54,596 75,607 Revolving lines of credit 49,053 35,447 Second Lien Senior Credit Facility 25,000 25,000 Nevada Industrial Revenue Bonds 3,000 3,500 Capital leases 18,131 1,435 Debt premium, net 387 535 ------------ ------------ 485,881 468,806 Less current portion of long-term debt 22,292 23,232 ------------ ------------ $463,589 $445,574 ============ ============
HOLDING 12.50% SENIOR SECURED NOTES On June 18, 1996, Holding, as part of a recapitalization (see Note 9), issued 12.50% Senior Secured Notes due 2006 for net proceeds, after expenses, of approximately $100.2 million (or $64.6 million after deducting the amount of such net proceeds used to purchase marketable securities available for payment of interest on the notes). These notes were exchanged in October 1996 for the 12.50% Series B Senior Secured Notes due 2006 (the "1996 Notes"). Interest is payable semi-annually on June 15 and December 15 of each year. In addition, from December 15, 1999 until June 15, 2001, Holding paid interest, at an increased rate of 0.75% per annum, in additional 1996 Notes valued at 100% of the principal amount thereof. Holding issued an additional approximately $30.7 million ($8.4 million in 2001 and $15.3 million in 2000) aggregate principal amount of 1996 Notes in satisfaction of its interest obligation. The 1996 Notes rank senior in right of payment to all existing and future subordinated indebtedness of Holding, including Holding's subordinated guarantee of all of Berry's Senior Subordinated Notes and PARI PASSU in right of payment with all senior indebtedness of Holding. The 1996 Notes are effectively subordinated to all existing and future senior indebtedness of Berry, including borrowings under the senior credit facility, second lien senior credit facility, and the Nevada Industrial Revenue Bonds. BERRY 12.25% SENIOR SUBORDINATED NOTES On April 21, 1994, Berry completed an offering of 100,000 units consisting of $100.0 million aggregate principal amount of 12.25% Berry Plastics Corporation Senior Subordinated Notes, due 2004 (the "1994 Notes") and 100,000 warrants to purchase 1.13237 shares of Class A Common Stock, $.00005 par value (collectively the "1994 Transaction"), of Holding. The net proceeds to Berry from the sale of the 1994 Notes, after expenses, were $93.0 million. On August 24, 1998, Berry completed an additional offering of $25.0 million aggregate principal amount of 12.25% Series B Senior Subordinated Notes due 2004 (the "1998 Notes"). The net proceeds to Berry from the sale of the 1998 Notes, after expenses, were $25.2 million. The 1994 Notes and 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, 1994 and October 15, 1998 for the 1994 Notes and 1998 Notes, respectively. Holding and all of Berry's subsidiaries fully, jointly, severally, and unconditionally guarantee on a senior subordinated basis the 1994 Notes and 1998 Notes. There are no nonguarantor subsidiaries. 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 (see Note 13). F-11 Berry is not required to make mandatory redemption or sinking fund payments with respect to the 1994 Notes and 1998 Notes. The 1994 Notes and 1998 Notes may be redeemed at the option of Berry, in whole or in part, at 102.042% through April 14, 2002 and 100% on April 15, 2002 and thereafter. Upon a change in control, as defined in the indenture entered into in connection with the 1994 Transaction (the "1994 Indenture") and the 1998 Transaction ("1998 Indenture"), each holder of notes will have the right to require Berry to repurchase all or any part of such holder's notes at a repurchase price in cash equal to 101% of the aggregate principal amount thereof plus accrued interest. The 1994 Notes and 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 senior credit facility, second lien senior credit facility, and the Nevada Industrial Revenue Bonds. The 1994 Indenture and 1998 Indenture contain certain covenants which, among other things, limit Berry and its subsidiaries' ability to incur debt, merge or consolidate, sell, lease or transfer assets, make dividend payments and engage in transactions with affiliates. BERRY 11% SENIOR SUBORDINATED NOTES On July 6, 1999, Berry completed an offering of $75.0 million aggregate principal amount of 11% Berry Plastics Corporation Senior Subordinated Notes, due 2007 (the "1999 Notes"). The net proceeds to Berry from the sale of the 1999 Notes, after expenses, were $72.0 million. The 1999 Notes mature on July 15, 2007 and interest is payable semi-annually on January 15 and July 15 of each year and commenced on January 15, 2000. Holding and all of Berry's subsidiaries fully, jointly, and severally, and unconditionally guarantee on a senior subordinated basis the 1999 Notes. There are no nonguarantor subsidiaries. Berry is not required to make mandatory redemption or sinking fund payments with respect to the 1999 Notes. On or subsequent to July 15, 2003, the 1999 Notes may be redeemed at the option of Berry, in whole or in part, at redemption prices ranging from 105.5% in 2003 to 100% in 2006 and thereafter. Upon a change in control, as defined in the indenture entered into in connection with the 1999 Transaction (the "1999 Indenture"), each holder of notes will have the right to require Berry to repurchase all or any part of such holder's notes at a repurchase price in cash equal to 101% of the aggregate principal amount thereof plus accrued interest. CREDIT FACILITY 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"). The Financing Agreement amended the prior agreement as additional funds were made available in connection with the acquisition of Poly-Seal. The amendment resulted in an extraordinary charge in fiscal 2000 of $1.0 million of deferred financing costs associated with the Financing Agreement and the prior financing agreement. As of December 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 December 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 $52.6 million term loan facility, (iv) a $2.0 million (using the December 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. At December 29, 2001, the Company had unused borrowing capacity under the Credit Facility's revolving line of credit of approximately $17.7 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. CBP Holdings, S.r.l. has a revolving credit facility (the "Italy Revolver") from Bank of America for $12.0 million (using the December 29, 2001 exchange rate) denominated in Euros. Bank of America also extends working capital financing (the "Italy Working Capital Line") of up to $1.5 million (using the December 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. F-12 The Credit Facility matures on January 21, 2004 unless previously terminated by the Company or by the lenders upon an Event of Default as defined in the Financing Agreement. The term loan facility requires periodic payments, varying in amount, through the maturity of the facility. Interest on borrowings under the Credit Facility is based on either (i) the lender's base rate (which is the higher of the lender's prime rate and the federal funds rate plus 0.5%) plus an applicable margin of 0.25% to 1.0% or (ii) eurodollar LIBOR (adjusted for reserves) plus an applicable margin of 2.25% to 3.0%, at the Company's option (4.4% at December 29, 2001 and 8.9% at December 30, 2000). Following receipt of the quarterly financial statements, the agent under the Credit Facility shall change the applicable interest rate margin on loans (other than under the UK Revolver and UK Term Loan) once per quarter to a specified margin determined by the ratio of funded debt to EBITDA of the Company and its subsidiaries. Notwithstanding the foregoing, interest on borrowings under the UK Revolver and the UK Term Loan is based on sterling LIBOR (adjusted for reserves) plus 2.25% and 2.75%, respectively. Interest on borrowings under the Italy Revolver and the Italy Working Capital Line is based on EURIBOR plus 2.0%. The Credit Facility contains various covenants that 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. SECOND LIEN SENIOR CREDIT FACILITY On July 17, 2000, Berry obtained a second lien senior credit facility from General Electric Capital Corporation for an aggregate principal amount of $25.0 million (the "Second Lien Senior Facility"), resulting in net proceeds of $24.3 million after fees and expenses. The proceeds were utilized to reduce amounts then outstanding under the US Revolver. The indebtedness is guaranteed by Holding and all of its subsidiaries (other than its subsidiaries in the United Kingdom and Italy). The Second Lien Senior Facility is secured by a second priority lien on substantially the same collateral as the collateral for the Credit Facility. The $25.0 million principal amount is due upon the Second Lien Senior Facility's maturity on January 21, 2004. Interest is based on either (i) the lender's base rate (which is the higher of the prime rate and the federal funds rate plus 0.5%) plus an applicable margin of 3.25% or (ii) eurodollar LIBOR (adjusted for reserves) plus an applicable margin of 4.75%, at the Company's option (6.8% at December 29, 2001 and 11.1% at December 30, 2000). The covenants under the Second Lien Senior Facility are substantially the same as those in the Credit Facility. NEVADA INDUSTRIAL REVENUE BONDS The Nevada Industrial Revenue Bonds bear interest at a variable rate (1.7% at December 29, 2001 and 5.0% at December 30, 2000), require annual principal payments of $0.5 million on April 1, are collateralized by irrevocable letters of credit issued by Bank of America under the Credit Facility and mature in April 2007. OTHER Future maturities of long-term debt are as follows: 2002, $22,292; 2003, $15,975; 2004, $223,916; 2005, $2,682; 2006, $137,347 and $83,282 thereafter. Interest paid was $44,171, $32,836, and $29,759, for 2001, 2000, and 1999, respectively. Interest capitalized was $589, $1,707, and $1,447, for 2001, 2000, and 1999, respectively. NOTE 6. LEASE AND OTHER COMMITMENTS Certain property and equipment are leased using capital and operating leases. In 2001, Berry entered into various capital lease obligations with no immediate cash flow effect resulting in capitalized property and equipment of $18,737. Total capitalized lease property consists of manufacturing equipment and a building with a cost of $22,342 and $3,589 and related accumulated amortization of $3,442 and $1,483 at December 29, 2001 and December 30, 2000, respectively. Capital lease amortization is included in depreciation expense. Total rental expense from operating leases was approximately $8,292, $9,183, and $7,282 for 2001, 2000, and 1999, respectively. F-13 Future minimum lease payments for capital leases and noncancellable operating leases with initial terms in excess of one year are as follows:
AT DECEMBER 29, 2001 ------------------------ CAPITAL OPERATING LEASES LEASES ----------- ----------- 2002 $ 4,627 $ 7,594 2003 3,708 5,521 2004 3,465 5,000 2005 2,320 3,234 2006 1,611 1,985 Thereafter 5,454 731 ----------- ----------- 21,185 $24,065 Less: amount representing interest (3,054) =========== ----------- Present value of net minimum lease payments $ 18,131 ===========
NOTE 7. INCOME TAXES For financial reporting purposes, income (loss) before income taxes and extraordinary item, by tax jurisdiction, is comprised of the following:
DECEMBER 29, DECEMBER 30, JANUARY 1, 2001 2000 2000 ------------ ------------ ------------ United States $ 5,046 $ (18,506) $ (8,105) Foreign (6,407) (3,721) (479) ------------ ------------ ------------ $ (1,361) $ (22,227) $ (8,584) ============ ============ ============
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of deferred tax liabilities and assets are as follows:
DECEMBER 29, DECEMBER 30, 2001 2000 ------------ ------------ Deferred tax assets: Allowance for doubtful accounts $ 654 $ 565 Inventory 1,422 1,481 Compensation and benefit accruals 2,871 2,412 Insurance reserves 657 628 Net operating loss carryforwards 14,102 17,214 Alternative minimum tax (AMT) credit carryforwards 3,055 3,055 ------------ ------------ Total deferred tax assets 22,761 25,355 Valuation allowance (3,629) (6,607) ------------ ------------ Deferred tax assets, net of valuation allowance 19,132 18,748 Deferred tax liabilities: Depreciation and amortization 19,621 19,239 ------------ ------------ Net deferred tax liability $ (489) $(491) ============ ============
F-14 Income tax expense (benefit) consists of the following:
DECEMBER 29, DECEMBER 30, JANUARY 1, 2001 2000 2000 ------------- ------------- ----------- Current Federal $ 154 $ - $ - Foreign 125 - 80 State 455 207 468 Deferred Federal - - - Foreign - (349) 6 State - - - ------------- ------------- ----------- Income tax expense (benefit) $ 734 $ (142) $ 554 ============= ============= ===========
Holding has unused operating loss carryforwards of approximately $37.7 million for federal and state income tax purposes which begin to expire in 2010. AMT credit carryforwards are available to Holding indefinitely to reduce future years' federal income taxes. Income taxes paid during 2001, 2000, and 1999 approximated $314, $329, and $860, respectively. A reconciliation of income tax expense (benefit), computed at the federal statutory rate, to income tax expense, as provided for in the financial statements, is as follows:
YEAR ENDED ---------------------------------------- DECEMBER 29, DECEMBER 30, JANUARY 1, 2001 2000 2000 -------------- ------------- ----------- Income tax expense (benefit) computed at $ (463) $ (7,557) $ (2,919) statutory rate State income tax expense, net of federal 795 (403) 309 benefit Amortization of goodwill 2,399 2,262 1,292 Expenses not deductible for income tax 36 119 248 purposes Change in valuation allowance (2,978) 5,340 1,773 Other 945 97 (149) -------------- ------------- ----------- Income tax expense (benefit) $ 734 $ (142) $ 554 ============== ============= ===========
NOTE 8. EMPLOYEE RETIREMENT PLANS Berry sponsors a defined contribution 401(k) retirement plan covering substantially all employees. Contributions are based upon a fixed dollar amount for employees who participate and percentages of employee contributions at specified thresholds. Contribution expense for this plan was approximately $1,349, $1,301, and $1,057, for 2001, 2000, and 1999, respectively. F-15 NOTE 9. STOCKHOLDERS' EQUITY COMMON STOCK On June 18, 1996, Holding consummated the transaction described below (the "1996 Transaction"). BPC Mergerco, Inc. ("Mergerco"), a wholly owned subsidiary of Holding, was organized by Atlantic Equity Partners International II, L.P. ("International"), J.P. Morgan Partners (SBIC), LLC (formerly known as Chase Venture Capital Associates, L.P.) ("JPMP(SBIC)"), and certain other institutional investors to effect the acquisition of a majority of the outstanding capital stock of Holding. Pursuant to the terms of a Common Stock Purchase Agreement dated as of June 12, 1996 each of International, JPMP(SBIC) and certain other equity investors (collectively the "Common Stock Purchasers") subscribed for shares of common stock of Mergerco. In addition, pursuant to the terms of a Preferred Stock Purchase Agreement dated as of June 12, 1996 (the "Preferred Stock Purchase Agreement"), JPMP(SBIC) and an additional institutional investor (the "Preferred Stock Purchasers") purchased shares of preferred stock of Mergerco (the "Preferred Stock") and warrants (the "1996 Warrants") to purchase shares of common stock of Mergerco. Immediately after the purchase of the common stock, the preferred stock and the 1996 Warrants of Mergerco, Mergerco merged (the "Merger") with and into Holding, with Holding being the surviving corporation. Upon the consummation of the Merger: each share of the Class A Common Stock, $.00005 par value, and Class B Common Stock, $.00005 par value, of Holding and certain privately-held warrants exercisable for such Class A and Class B Common Stock were converted into the right to receive cash equal to the purchase price per share for the common stock into which such warrants were exercisable less the amount of the nominal exercise price therefor, and all other classes of common stock of Holding, a majority of which was held by certain members of management, were converted into shares of common stock of the surviving corporation. In addition, upon the consummation of the Merger, the holders of the warrants (the "1994 Warrants") to purchase capital stock of Holding that were issued in connection with the 1994 Transaction became entitled to receive cash equal to the purchase price per share for the common stock into which such warrants were exercisable less the amount of the exercise price therefor. The Company's common stock shareholders who held common stock immediately preceding the 1996 Transaction retained 78% of the common stock. The authorized capital stock of Holding consists of 4,814,000 shares of capital stock, including 2,500,000 shares of Common Stock, $.01 par value (the "Holding Common Stock"). Of the 2,500,000 shares of Holding Common Stock, 500,000 shares are designated Class A Voting Common Stock (the "Class A Voting Stock"), 500,000 shares are designated Class A Nonvoting Common Stock (the "Class A Nonvoting Stock"), 500,000 shares are designated Class B Voting Common Stock (the "Class B Voting Stock"), 500,000 shares are designated Class B Nonvoting Common Stock (the "Class B Nonvoting Stock"), and 500,000 shares are designated Class C Nonvoting Common Stock (the "Class C Nonvoting Stock"). PREFERRED STOCK AND WARRANTS In June 1996, for aggregate consideration of $15.0 million, Holding issued units (the "Units") comprised of Series A Senior Cumulative Exchangeable Preferred Stock, par value $.01 per share (the "Preferred Stock"), and detachable warrants to purchase shares of Class B Common Stock (voting and non-voting) constituting 6% of the issued and outstanding Common Stock of all classes, determined on a fully-diluted basis (the "Warrants"). Dividends accrue at a rate of 14% per annum, compounding and payable quarterly in arrears (each date of payment, a "Dividend Payment Date") and will accumulate until declared and paid. Dividends declared and accruing prior to the first Dividend Payment Date occurring after the sixth anniversary of the issue date (the "Cash Dividend Date") may, at the option of Holding, be paid in cash in full or in part or accrue quarterly on a compound basis. Thereafter, all dividends are payable in cash in arrears. The dividend rate is subject to increase to a rate of (i) 16% per annum if (and for so long as) Holding fails to declare and pay dividends in cash for any quarterly period following the Cash Dividend Date and (ii) 15% per annum if (and for so long as) Holding fails to comply with its obligations relating to the rights and preferences of the Preferred Stock. If Holding fails to pay in full, in cash, (a) all accrued and unpaid dividends on or prior to the twelfth anniversary of the issue date or (b) all accrued dividends on any Dividend Payment Date following the twelfth anniversary of the issue date, the holders of Preferred Stock will be permitted to elect a majority of the Board of Directors of Holding. F-16 The Preferred Stock ranks prior to all other classes of stock of Holding upon liquidation and is entitled to receive, out of assets available for distribution, cash in the aggregate amount of $15.0 million, plus all accrued and unpaid dividends thereon. Subject to the terms of the 1996 Indenture, on any Dividend Payment Date, Holding has the option of exchanging the Preferred Stock, in whole but not in part, for Senior Subordinated Exchange Notes, at the rate of $25 in principal amount of notes for each $25 of liquidation preference of Preferred Stock held; provided, however, that no shares of Preferred Stock may be exchanged for so long as any shares of Preferred Stock are held by JPMP(SBIC) or its affiliates. Upon such exchange, Holding will be required to pay in cash all accrued and unpaid dividends. Pursuant to the Preferred Stock Purchase Agreement, the holders of Preferred Stock and Warrants have unlimited incidental registration rights (subject to cutbacks under certain circumstances). The exercise price of the Warrants is $.01 per Warrant and the Warrants are exercisable immediately upon issuance. All unexercised warrants will expire on the tenth anniversary of the issue date. The number of shares issuable upon exercise of a Warrant are subject to anti-dilution adjustments upon the occurrence of certain events. In conjunction with the acquisition of Venture Packaging, Inc. in 1997, Holding authorized and issued 200,000 shares of Series B Cumulative Preferred Stock to certain selling shareholders of Venture Packaging, Inc. The Preferred Stock has a stated value of $25 per share, and dividends accrue at a rate of 14.75% per annum and will accumulate until declared and paid. The Preferred Stock ranks junior to the Series A Preferred Stock and prior to all other capital stock of Holding. In addition, Warrants to purchase 9,924 shares of Class B Non-Voting Common Stock at $108 per share were issued to the same selling shareholders of Venture Packaging, Inc. Additional warrants to purchase 386 shares of Class B Non-Voting Common Stock at $108 per share were issued in fiscal 2000 to the same selling shareholders of Venture Packaging, Inc. In connection with the Poly-Seal acquisition in 2000, Holding issued 1,000,000 shares of Series A-1 Preferred Stock to JPMP(SBIC) and The Northwestern Mutual Life Insurance Company (collectively, the "Purchasers"). The Series A-1 Preferred Stock has a stated value of $25 per share, and dividends accrue at a rate of 14% per annum and will accumulate until declared and paid. The Series A-1 Preferred Stock ranks pari-passu to the Series A Preferred Stock and prior to all other capital stock of Holding. In addition, Warrants to purchase an aggregate of 25,997 shares of Class B Non-Voting Common Stock at $0.01 per share were issued to the Purchasers. 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 $639 per share to $1,024 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. F-17 STOCK OPTION PLAN Pursuant to the provisions of the BPC Holding Corporation 1996 Stock Option Plan (the "Option Plan") as amended, whereby 76,620 shares have been reserved for issuance, Holding has granted options to certain officers and key employees to acquire shares of Class B Nonvoting Common Stock. These options are subject to various agreements, which among other things, set forth the class of stock, option price and performance thresholds to determine exercisability and vesting requirements. The Option Plan expires October 3, 2003 or such earlier date on which the Board of Directors of Holding, in its sole discretion, determines. Option prices range from $100 to $226 per share. Options granted under the Option Plan typically expire after seven years and vest over a five-year period with half of each person's award based on continued employment and half based on the Company achieving financial performance targets. Financial Accounting Standards Board Statement 123, ACCOUNTING FOR STOCK- BASED COMPENSATION ("Statement 123"), prescribes accounting and reporting standards for all stock-based compensation plans. Statement 123 provides that companies may elect to continue using existing accounting requirements for stock-based awards or may adopt a new fair value method to determine their intrinsic value. Holding has elected to continue following Accounting Principles Board Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES ("APB 25") to account for its employee stock options. Under APB 25, because the exercise price of Holding's employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized at the grant date. Information related to the Option Plan is as follows:
DECEMBER 29, DECEMBER 30, JANUARY 1, 2001 2000 2000 ----------------- ---------------- ---------------- Weighted Weighted Weighted Number Average Number Average Number Average Of Exercise Of Exercise Of Exercise Shares Price Shares Price Shares Price ----------------- ---------------- ---------------- Options outstanding, 60,774 $132 51,479 $107 50,729 $105 beginning of year Options granted 10,975 226 16,225 226 1,500 170 Options exercised (2,713) 107 - - - - Options canceled (8,616) 116 (6,930) 158 (750) 115 --------- --------- -------- Options outstanding, 60,420 155 60,774 132 51,479 107 end of year ========= ========= ======== Option price range at end of year $100 - $226 $100 - $226 $100 - $170 Options exercisable at end of year 39,487 34,641 30,091 Options available for grant at year end 13,487 15,846 141 Weighted average fair value of options granted during year $226 $226 $170
The following table summarizes information about the options outstanding at December 29, 2001:
Weighted Weighted Number Average Average Exercisable Range of Remaining Exercise at Exercise Number Outstanding Contractual Price December 29, Prices At December 29, 2001 Life 2001 --------------------------------------------------------------------------------------- $100 - $122 32,880 1 year $104 32,880 $170 - $226 27,540 5 years $215 6,607
Disclosure of pro forma financial information is required by Statement 123 as if Holding had accounted for its employee stock options using the fair value method as defined by the Statement. The fair value for options granted by Holding have been estimated at the date of grant using a Black Scholes option pricing model with the following weighted average assumptions: F-18
YEAR ENDED ------------------------------------------- DECEMBER 29, DECEMBER 30, JANUARY 1, 2001 2000 2000 -------------- ------------- -------------- Risk-free interest rate 5.5% 6.5% 7.0% Dividend yield 0.0% 0.0% 0.0% Volatility factor .28 .20 .19 Expected option life 6.5 years 6.5 years 5.0 years
For purposes of the pro forma disclosures, the estimated fair value of the stock options are amortized to expense over the related vesting period. Because compensation expense is recognized over the vesting period, the initial impact on pro forma net loss may not be representative of compensation expense in future years, when the effect of amortization of multiple awards would be reflected in the Consolidated Statement of Operations. Holding's pro forma net losses giving effect to the estimated compensation expense related to stock options are as follows:
YEAR ENDED ---------------------------------------------- DECEMBER 29, DECEMBER 30, JANUARY 1, 2001 2000 2000 ------------- --------------- ------------ Pro forma net loss $ (2,700) $ (23,514) $ (9,400)
STOCKHOLDERS AGREEMENTS Holding entered into a stockholders agreement (the "Stockholders Agreement") dated as of June 18, 1996, as amended with the Common Stock Purchasers, certain management stockholders and, for limited purposes thereunder, the Preferred Stock Purchasers. The Stockholders Agreement grants certain rights including, but not limited to, designation of members of Holding's Board of Directors, the initiation of an initial public offering of equity securities of the Company or a sale of Holding. The agreement also restricts certain transfers of Holding's equity. Holding has an agreement with its management stockholders and International that contains provisions (i) limiting transfers of equity by the management stockholders; (ii) requiring the management stockholders to sell their shares as designated by Holding or International upon the consummation of certain transactions; (iii) granting the management stockholders certain rights of co-sale in connection with sales by International; (iv) granting rights to repurchase capital stock from the management stockholders upon the occurrence of certain events; and (v) requiring the management stockholders to offer shares to Holding prior to any permitted transfer. NOTE 10. RELATED PARTY TRANSACTIONS First Atlantic Capital, Ltd. ("First Atlantic") is engaged by International to provide certain financial and management consulting services for which it receives annual fees. The Company is party to a management agreement (the "Management Agreement") with First Atlantic. Pursuant to the Management Agreement, First Atlantic received advisory fees of approximately $690, $580, $139, and $250 in July 1999, May 2000, March 2001, and June 2001, respectively, for originating, structuring and negotiating the acquisitions of CPI Holding Corporation, Poly-Seal, Capsol, and Pescor, respectively. In consideration of financial advisory and management consulting services, the Company paid First Atlantic fees and expenses of $756, $821, and $792 for fiscal 2001, 2000, and 1999, respectively. F-19 NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS INFORMATION Holding's and the Company's financial instruments generally consist of cash and cash equivalents and long-term debt. The carrying amounts of Holding's and the Company's financial instruments approximate fair value at December 29, 2001, except for the 1998 Notes and 1996 Notes for which the fair value was below the carrying value by approximately $0.5 million and $2.7 million, respectively, and the 1994 Notes and 1999 Notes for which the fair value exceeded the carrying value by $0.7 million and $3.0 million, respectively. NOTE 12. 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) non-cash compensation, (ii) other non- recurring or "one-time" expenses, and (iii) management fees and reimbursed expenses paid to First Atlantic ("Adjusted EBITDA"). One-time expenses represent non-recurring expenses that primarily relate to recently acquired businesses and plant consolidations. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies.
YEAR ENDED ----------------------------------------- DECEMBER 29, DECEMBER 30, JANUARY 1, 2001 2000 2000 -------------- ------------- ------------- Net sales: Containers $234,441 $ 231,209 $188,696 Closures 132,384 112,202 81,035 Consumer Products 94,834 64,677 59,103 Adjusted EBITDA: Containers 63,997 47,578 41,303 Closures 28,444 23,646 20,476 Consumer Products 18,411 9,167 9,762 Total assets: Containers 204,001 189,129 147,931 Closures 158,009 178,768 133,230 Consumer Products 84,866 45,225 59,646 Reconciliation of Adjusted EBITDA to loss before income taxes and extraordinary item: Adjusted EBITDA for reportable segments $110,852 $ 80,391 $ 71,541 Net interest expense (54,355) (51,457) (40,817) Depreciation (38,105) (31,569) (24,580) Amortization (12,802) (10,579) (7,215) Loss on disposal of property and equipment (473) (877) (1,416) One-time expenses (5,045) (6,804) (5,224) Non-cash compensation (796) (459) - Management fees (637) (873) (873) -------------- ------------- ------------- Loss before income taxes and extraordinary item $(1,361) $(22,227) $(8,584) ============== ============= =============
F-20 NOTE 13. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (IN THOUSANDS) 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 1994 Notes, 1998 Notes, and 1999 Notes issued by Berry. There are no nonguarantor subsidiaries with respect to the notes issued by Berry. Holding's 1996 Notes are not guaranteed by Berry or any of Berry's wholly owned subsidiaries. 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 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 December 29, 2001 and December 30, 2000 and for the fiscal years ended December 29, 2001, December 30, 2000, and January 1, 2000. The equity method has been used with respect to investments in subsidiaries.
DECEMBER 29, 2001 ---------------------------------------------------------------------- BPC Berry Holding Plastics Combined Corporation Corporation Guarantor Consolidating (PARENT) (ISSUER) SUBSIDIARIES ADJUSTMENTS CONSOLIDATED --------------- ----------- -------------- -------------- ------------ CONSOLIDATING BALANCE SHEETS Current assets $ 440 $32,459 $ 78,293 $ - $111,192 Net property and equipment - 71,437 131,780 - 203,217 Other noncurrent assets 23,980 289,764 109,632 (290,909) 132,467 --------------- ----------- -------------- -------------- ------------ Total assets $24,420 $393,660 $319,705 $(290,909) $446,876 =============== =========== ============== ============== ============ Current liabilities $ 861 $ 60,212 $ 30,792 $ - $ 91,865 Noncurrent liabilities 163,160 311,574 345,799 (325,921) 494,612 Equity (deficit) (139,601) 21,874 (56,886) 35,012 (139,601) --------------- ----------- -------------- -------------- ------------ Total liabilities and equity (deficit) $ 24,420 $393,660 $319,705 $(290,909) $446,876 =============== =========== ============== ============== ============ DECEMBER 30, 2000 ---------------------------------------------------------------------- BPC Berry Holding Plastics Combined Corporation Corporation Guarantor Consolidating (PARENT) (ISSUER) SUBSIDIARIES ADJUSTMENTS CONSOLIDATED --------------- ----------- -------------- -------------- ------------ Consolidating Balance Sheets 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 =============== =========== ============== ============== ============
F-21
YEAR ENDED DECEMBER 29,2001 ---------------------------------------------------------------------- BPC Berry Holding Plastics Combined Corporation Corporation Guarantor Consolidating (PARENT) (ISSUER) SUBSIDIARIES ADJUSTMENTS CONSOLIDATED --------------- ----------- -------------- -------------- ------------ CONSOLIDATING STATEMENTS OF OPERATIONS Net sales $ - $159,783 $301,876 $ - $461,659 Cost of goods sold - 103,867 234,133 - 338,000 --------------- ----------- -------------- -------------- ------------ Gross margin - 55,916 67,743 - 123,659 Operating expenses 924 23,113 46,155 - 70,192 --------------- ----------- -------------- -------------- ------------ Operating income (loss) (924) 32,803 21,588 - 53,467 Other expenses - 46 427 - 473 Interest expense, net 17,469 7,277 29,609 - 54,355 Income taxes (benefit) (8,307) 8,682 359 - 734 Equity in net (income) loss from subsidiary (7,991) 8,807 - (816) - --------------- ----------- -------------- -------------- ------------ Net income (loss) $(2,095) $ 7,991 $(8,807) $816 $(2,095) =============== =========== ============== ============== ============ CONSOLIDATING STATEMENTS OF CASH FLOWS Net income (loss) $ (2,095) $7,991 $(8,807) $ 816 $(2,095) Non-cash expenses 9,775 16,146 37,523 - 63,444 Equity in net (income) loss from subsidiary (7,991) 8,807 - (816) - Changes in working capital 154 5,882 (13,037) - (7,001) --------------- ----------- -------------- -------------- ------------ Net cash provided by (used for)operating activities (157) 38,826 15,679 - 54,348 Net cash used for investing activities - (30,688) (25,602) - (56,290) Net cash provided by (used for)financing activities 377 (9,199) 9,402 - 580 Effect of exchange rate changes on cash - 540 - - 540 --------------- ----------- -------------- -------------- ------------ Net increase (decrease) in cash and cash equivalents 220 (521) (521) - (822) Cash and cash equivalents at beginning of year 220 642 1,192 - 2,054 --------------- ----------- -------------- -------------- ------------ Cash and cash equivalents at end of year $ 440 $ 121 $ 671 $ - $1,232 =============== =========== ============== ============== ============ YEAR ENDED DECEMBER 30,2000 ---------------------------------------------------------------------- BPC Berry Holding Plastics Combined Corporation Corporation Guarantor Consolidating (PARENT) (ISSUER) SUBSIDIARIES ADJUSTMENTS CONSOLIDATED --------------- ----------- -------------- -------------- ------------ Consolidating Statements of Operations Net sales $ - $158,055 $250,033 $ - $408,088 Cost of goods sold - 108,739 203,380 - 312,119 --------------- ----------- -------------- -------------- ------------ Gross margin - 49,316 46,653 - 95,969 Operating expenses 616 23,303 41,943 - 65,862 --------------- ----------- -------------- -------------- ------------ Operating income (loss) (616) 26,013 4,710 - 30,107 Other expenses - 258 619 - 877 Interest expense, net 16,025 11,221 24,211 - 51,457 Income taxes (benefit) 18 168 (328) - (142) Extraordinary item - 1,022 - - 1,022 Equity in net (income) loss from subsidiary 6,448 19,792 - (26,240) - --------------- ----------- -------------- -------------- ------------ Net income (loss) $(23,107) $(6,448) $(19,792) $26,240 $(23,107) =============== =========== ============== ============== ============ Consolidating Statements of Cash Flows Net income (loss) $(23,107) $(6,448) $(19,792) $26,240 $(23,107) Non-cash expenses 16,958 13,332 32,360 - 62,650 Equity in net (income) loss from subsidiary 6,448 19,792 - (26,240) - Changes in working capital (646) 2,931 (5,722) - (3,437) --------------- ----------- -------------- -------------- ------------ Net cash provided by (used for) operating activities (347) 29,607 6,846 - 36,106 Net cash used for investing activities - (78,328) (30,387) - (108,715) Net cash provided by (used for) financing activities (136) 48,307 23,866 - 72,037 Effect of exchange rate changes on cash - 80 - - 80 --------------- ----------- -------------- -------------- ------------ Net increase (decrease) in cash and cash equivalents (483) (334) 325 - (492) Cash and cash equivalents at beginning of year 703 976 867 - 2,546 --------------- ----------- -------------- -------------- ------------ Cash and cash equivalents at end of year $ 220 $ 642 $ 1,192 $ - $ 2,054 =============== =========== ============== ============== ============
F-22
YEAR ENDED JANUARY 1, 2000 ---------------------------------------------------------------------- BPC Berry Holding Plastics Combined Corporation Corporation Guarantor Consolidating (PARENT) (ISSUER) SUBSIDIARIES ADJUSTMENTS CONSOLIDATED --------------- ----------- -------------- -------------- ------------ Consolidating Statements of Operations Net sales $ - $149,901 $178,933 $ - $328,834 Cost of goods sold - 98,950 142,117 - 241,067 --------------- ----------- -------------- -------------- ------------ Gross margin - 50,951 36,816 - 87,767 Operating expenses 70 23,638 30,410 - 54,118 --------------- ----------- -------------- -------------- ------------ Operating income (loss) (70) 27,313 6,406 - 33,649 Other expenses - 21 1,395 - 1,416 Interest expense, net 13,845 8,389 18,583 - 40,817 Income taxes 18 425 111 - 554 Extraordinary item - - - - - Equity in net (income) loss from subsidiary (4,795) 13,683 - (8,888) - --------------- ----------- -------------- -------------- ------------ Net income (loss) $(9,138) $ 4,795 $(13,683) $8,888 $ (9,138) =============== =========== ============== ============== ============ Consolidating Statements of Cash Flows Net income (loss) $(9,138) $ 4,795 $(13,683) $8,888 $ (9,138) Non-cash expenses 14,135 10,663 23,986 - 48,784 Equity in net (income) loss from subsidiary (4,795) 13,683 - (8,888) - Changes in working capital (161) 90 (3,574) - (3,645) --------------- ----------- -------------- -------------- ------------ Net cash provided by operating activities 41 29,231 6,729 - 36,001 Net cash used for investing activities - (91,918) (15,060) - (106,978) Net cash provided by financing activities 40 63,207 7,888 - 71,135 Effect of exchange rate changes on cash - 70 - - 70 --------------- ----------- -------------- -------------- ------------ Net increase (decrease) in cash and cash equivalents 81 590 (443) - 228 Cash and cash equivalents at beginning of year 622 386 1,310 - 2,318 --------------- ----------- -------------- -------------- ------------ Cash and cash equivalents at end of year $ 703 $ 976 $ 867 $ - $ 2,546 =============== =========== ============== ============== ============
Note 14. Subsequent Event ON JANUARY 24, 2002, Berry acquired the Alcoa Flexible Packaging injection molding assets of Mt. Vernon Plastics Corporation for aggregate consideration of approximately $2.6 million. The purchase was financed through borrowings under the US Revolver. On January 31, 2002, Berry entered into a sale/leaseback arrangement with respect to these assets. F-23 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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, on the 19th day of March, 2002. BPC HOLDING CORPORATION By /S/IRA G.BOOTS ------------------------ Ira G. Boots President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE --------- ----- ---- /s/Roberto Buaron Chairman of the Board of Directors March 19, 2002 ----------------------- Roberto Buaron President and Director March 19, 2002 /s/Ira G. Boots (Principal Executive Officer) ------------------------- Ira G. Boots Executive Vice President, Chief Financial Officer, Treasurer and Secretary (Principal Financial and /s/James M. Kratochvil Accounting Officer) March 19, 2002 ------------------------- James M. Kratochvil /s/David M. Clarke Director March 19, 2002 -------------------------- David M. Clarke /s/Lawrence G. Graev Director March 19, 2002 -------------------------- Lawrence G. Graev /s/Donald Hofmann, Jr. Director March 19, 2002 -------------------------- Donald Hofmann, Jr. Vice President, Assistant Secretary, March 19, 2002 /s/Joseph S. Levy and Director -------------------------- Joseph S. Levy /s/Mathew J. Lori Director March 19, 2002 -------------------------- Mathew J. Lori
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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, on the 19th day of March, 2002. BERRY PLASTICS CORPORATION By /S/IRA G. BOOTS -------------------- Ira G. Boots President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE --------- ----- ---- /s/Roberto Buaron Chairman of the Board of Directors March 19, 2002 ----------------------- Roberto Buaron President, Chief Executive Officer March 19, 2002 /s/Ira G. Boots and Director (Principal Executive Officer) ------------------------- Ira G. Boots Executive Vice President, Chief Financial Officer, Treasurer and Secretary (Principal Financial and /s/James M. Kratochvil Accounting Officer) March 19, 2002 ------------------------- James M. Kratochvil Vice President, Assistant Secretary, March 19, 2002 /s/Joseph S. Levy and Director -------------------------- Joseph S. Levy /s/David M. Clarke Director March 19, 2002 -------------------------- David M. Clarke /s/Lawrence G. Graev Director March 19, 2002 -------------------------- Lawrence G. Graev /s/Donald Hofmann, Jr. Director March 19, 2002 -------------------------- Donald Hofmann, Jr. /s/Mathew J. Lori Director March 19, 2002 -------------------------- Mathew J. Lori
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(D) OF THE ACT BY REGISTRANT WHICH HAS NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT The Registrants have not sent any annual report or proxy material to securityholders. BPC HOLDING CORPORATION SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (IN THOUSANDS)
CHARGED TO BALANCE AT CHARGED TO OTHER BALANCE DESCRIPTION BEGINNING COSTS AND ACCOUNTS - DEDUCTIONS - AT END OF YEAR EXPENSES DESCRIBE DESCRIBE OF YEAR ---------------------------- ------------ ------------ ------------- -------------- ----------- Year ended December 29, 2001 Allowance for doubtful accounts $ 1,724 $ 337 $ 295 (2) $ 286 (1) $ 2,070 ============ ============ ============= ============== =========== Year ended December 30, 2000 Allowance for doubtful accounts $ 1,386 $ 79 $ 510 (2) $ 251 (1) $ 1,724 ============ ============ ============= ============== =========== Year ended January 1, 2000 Allowance for doubtful accounts $ 1,651 $ 324 $ 456 (2) $1,045 (1) $ 1,386 ============ ============ ============= ============== =========== (1) Uncollectible accounts written off, net of recoveries. (2) Primarily relates to purchase of accounts receivable and related allowance through acquisitions.
S-1
INDEX EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ------------------------- 2.1 Asset Purchase Agreement dated February 12, 1992, among Berry Plastics Corporation (the "Company"), Berry Iowa Corporation, Berry Carolina, Inc., Genpak Corporation, a New York corporation, and Innopac International Inc., a public Canadian corporation (filed as Exhibit 10.1 to the Registration Statement on Form S-1 filed on February 24, 1994 (the "Form S-1") and incorporated herein by reference) 2.2 Asset Purchase Agreement dated December 24, 1994, between the Company and Berry Plastics, Inc. (filed as Exhibit 10.2 to the Form S-1 and incorporated herein by reference) 2.3 Asset Purchase Agreement dated March 1, 1995, among Berry Sterling Corporation, Sterling Products, Inc. and the stockholders of Sterling Products, Inc. (filed as Exhibit 2.3 to the Annual Report on Form 10-K filed on March 31, 1995 (the "1994 Form 10-K") and incorporated herein by reference) 2.4 Asset Purchase Agreement dated December 21, 1995, among Berry Tri-Plas Corporation, Tri-Plas, Inc. and Frank C. DeVore (filed as Exhibit 2.4 to the Annual Report on Form 10-K filed on March 28, 1996 (the "1995 Form 10-K") and incorporated herein by reference) 2.5 Asset Purchase Agreement dated January 23, 1996, between the Company and Alpha Products, Inc. (filed as Exhibit 2.5 to the 1995 Form 10-K and incorporated herein by reference) 2.6 Stock Purchase and Recapitalization Agreement dated as of June 12, 1996, by and among Holding, BPC Mergerco, Inc. ("Mergerco") and the other parties thereto (filed as Exhibit 2.1 to the Current Report on Form 8-K filed on July 3, 1996 (the "Form 8-K") and incorporated herein by reference) 2.7 Preferred Stock and Warrant Purchase Agreement dated as of June 12, 1996, by and among Holding, Mergerco, Chase Venture Capital Associates, L.P. ("CVCA") and The Northwestern Mutual Life Insurance Company ("Northwestern") (filed as Exhibit 2.2 to the Form 8-K and incorporated herein by reference) 2.8 Agreement and Plan of Merger dated as of June 18, 1996, by and between Holding and Mergerco (filed as Exhibit 2.3 to the Form 8-K and incorporated herein by reference) 2.9 Certificate of Merger of Mergerco with and into Holding, dated as of June 18, 1996 (filed as Exhibit 2.9 to the Registration Statement on Form S-4 filed on July 17, 1996 (the "1996 Form S-4") and incorporated herein by reference) 2.10 Agreement and Plan of Reorganization dated as of January 14, 1997 (the "PackerWare Reorganization Agreement"), among the Company, PackerWare Acquisition Corporation, PackerWare Corporation and the shareholders of PackerWare (filed as Exhibit 2.1 to the Current Report on Form 8-K filed on February 4, 1997 (the "1997 8- K") and incorporated herein by reference) 2.11 Amendment to the PackerWare Reorganization Agreement dated as of January 20, 1997 (filed as Exhibit 2.2 to the 1997 8-K and incorporated herein by reference) 2.12 Asset Purchase Agreement dated as of January 17, 1997, among the Company, Container Industries, Inc. and the shareholders of Container Industries, Inc. (filed as Exhibit 2.12 to the Annual Report on Form 10-K for the fiscal year ended December 28, 1996 (the "1996 Form 10-K) and incorporated herein by reference) 2.13 Agreement and Plan of Reorganization dated as of January 14, 1997, as amended on January 20, 1997, among the Company, PackerWare Acquisition Corporation, PackerWare Corporation and the Shareholders of PackerWare Corporation (filed as Exhibits 2.1 and 2.2 to the Current Report on Form 8-K filed February 3, 1997 and incorporated herein by reference) 2.14 Asset Purchase Agreement dated May 13, 1997, among the Company, Berry Plastics Design Corporation, Virginia Design Packaging Corp. and the shareholders of Virginia Design Packaging Corp. (filed as Exhibit 2.14 to the Annual Report on Form 10-K for the fiscal year ended December 27, 1997 (the "1997 Form 10-K") and incorporated herein by reference) 2.15 Agreement for the Sale and Purchase of the Entire Issued Share Capital of Norwich Injection Moulders Limited dated July 2, 1998, among the Company, NIM Holdings Limited and the persons listed on Schedule 1 thereto (filed as Exhibit 2.15 to Amendment No. 1 to Form S-4 filed on December 29, 1998 (the "1998 Amended Form S-4") and incorporated herein by reference) 2.16 Stock Purchase Agreement dated June 18, 1999 among the Company, CPI Holding, Cardinal and the Shareholders of CPI Holding (filed as Exhibit 2.1 to the Current Report on Form 8-K filed on July 21, 1999 and incorporated herein by reference) 2.17 Merger Agreement, dated May 5, 2000, among the Company, Berry Plastics Acquisition Corporation, Poly-Seal and certain shareholders of Poly-Seal (filed as Exhibit 2.1 to the Current Report on Form 8-K filed on May 9, 2000 and incorporated herein by reference) 2.18 Share and Quota Purchase Agreement, dated July 27, 2000, between the Company and Annamaria Agnottoli, Guisepe Garibaldi, Francesco Garibaldi, Maddalena Garibaldi, and Maria Lorenza Zambon (filed as Exhibit 2.18 to the Annual Report on Form 10-K for the fiscal year ended December 30, 2000 (the "2000 Form 10-K") and incorporated herein by reference) 2.19 Agreement and Plan of Reorganization, dated as of May 14, 2001 among BPC Holding Corporation, Pescor, Inc., Pescor Plastics, Inc. and the shareholders of Pescor Plastics, Inc. named therein (filed as Exhibit 2.1 to the Quarterly Report on Form 10-Q filed on August 13, 2001 and incorporated herein by reference) 3.1 Amended and Restated Certificate of Incorporation of Holding (filed as Exhibit 3.1 to the 2000 Form 10-K and incorporated herein by reference) 3.2 By-laws of Holding (filed as Exhibit 3.2 to the Form S-1 and incorporated herein by reference) 3.3 Certificate of Incorporation of the Company (filed as Exhibit to the Form S-1 and incorporated herein by reference) 3.4 By-laws of the Company (filed as Exhibit 3.4 to the Form S-1 and incorporated herein by reference) 3.5 Certificate of Designation, Preferences, and Rights of Series B Cumulative Preferred Stock of Holding (filed as Exhibit 3.10 to the 1997 Form 10-K and incorporated herein by reference) 3.6 Certificate of Amendment of Certificate of Designation, Preferences and Rights of Series B Cumulative Preferred Stock of Holding (filed as Exhibit 3.6 to the 2000 Form 10-K and incorporated herein by reference) 3.7 Certificate of Amendment to the Amended and Restated Certificate of Incorporation of BPC Holding Corporation (filed as Exhibit 3.1 to the Quarterly Report on Form 10-Q filed on August 13, 2001 and incorporated herein by reference) 3.8 Certificate of Designation, Preferences and Rights of the Series C-1 Preferred Stock of BPC Holding Corporation (filed as Exhibit 3.2 to the Quarterly Report on Form 10-Q filed on August 13, 2001 and incorporated herein by reference) 3.9 Certificate of Designation, Preferences and Rights of the Series C-2 Preferred Stock of BPC Holding Corporation (filed as Exhibit 3.3 to the Quarterly Report on Form 10-Q filed on August 13, 2001 and incorporated herein by reference) 3.10 Certificate of Designation, Preferences and Rights of the Series C-3 Preferred Stock of BPC Holding Corporation (filed as Exhibit 3.4 to the Quarterly Report on Form 10-Q filed on August 13, 2001 and incorporated herein by reference) 3.11 Certificate of Designation, Preferences and Rights of the Series C-4 Preferred Stock of BPC Holding Corporation (filed as Exhibit 3.5 to the Quarterly Report on Form 10-Q filed on August 13, 2001 and incorporated herein by reference) 3.12 Certificate of Designation, Preferences and Rights of the Series C-5 Preferred Stock of BPC Holding Corporation (filed as Exhibit 3.6 to the Quarterly Report on Form 10-Q filed on August 13, 2001 and incorporated herein by reference) *3.13 Certificate of Designation, Preferences and Rights of the Series D Preferred Stock of BPC Holding Corporation 4.1 Indenture dated April 21, 1994 between the Company and United States Trust Company of New York, as Trustee (the "1994 Indenture") (including the form of Note and Guarantees as Exhibits A and B thereto respectively) (filed as Exhibit 4.1 to the Form S-1 and incorporated herein by reference) 4.2 Warrant Agreement between Holding and United States Trust Company of New York, as Warrant Agent (filed as Exhibit 4.2 to the Form S-1 and incorporated herein by reference) 4.3 Indenture dated as of June 18, 1996, between Holding and First Trust of New York, National Association, as Trustee (the "Trustee"), relating to Holding's Series A and Series B 12.5% Senior Secured Notes Due 2006 (filed as Exhibit 4.3 to the 1996 Form S-4 and incorporated herein by reference) 4.4 Pledge, Escrow and Disbursement Agreement dated as of June 18, 1996, by and among Holding, the Trustee and First Trust of New York, National Association, as Escrow Agent (filed as Exhibit 4.4 to the 1996 Form S-4 and incorporated herein by reference) 4.5 Holding Pledge and Security Agreement dated as of June 18, 1996, between Holding and First Trust of New York, National Association, as Collateral Agent (filed as Exhibit 4.5 to the 1996 Form S-4 and incorporated herein by reference) 4.6 Registration Rights Agreement dated as of June 18, 1996, by and among Holding and Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") (filed as Exhibit 4.6 to the 1996 Form S-4 and incorporated herein by reference) 4.7 BPC Holding Corporation 1996 Stock Option Plan (filed as Exhibit 4.7 to the 1996 Form 10-K and incorporated herein by reference) 4.8 Form of Nontransferable Performance-Based Incentive Stock Option Agreement (filed as Exhibit 4.7 to the 1996 Form 10-K and incorporated herein by reference) 4.9 Indenture dated as of August 24, 1998 among the Company, the Guarantors and United States Trust Company of New York, as trustee (the "1998 Indenture") (filed as Exhibit 4.9 to the 1998 Amended Form S-4 and incorporated herein by reference) 4.10 Registration Rights Agreement dated as of August 24, 1998 by and among the Company, the Guarantors and DLJ (filed as Exhibit 4.10 to the 1998 Amended Form S-4 and incorporated herein by reference) 4.11 Indenture dated as of July 6, 1999 among the Company, the Guarantors and United States Trust Company of New York , as trustee (the "1999 Indenture") (filed as Exhibit 10.27 to the Registration Statement on Form S-4 (Registration No. 333-85739) filed on August 23, 1999 (the "1999 Form S-4") and incorporated herein by reference) 4.12 Registration Rights Agreement dated as of July 6, 1999 by and among the Company, the Guarantors, DLJ and Chase Securities, Inc. (filed as Exhibit 10.28 to the 1999 Form S-4 and incorporated herein by reference) 4.13 Fourth Supplemental Indenture to the 1994 Indenture dated as of June 10, 1997 among the Company, Holding, Berry Iowa Corporation, Berry Tri-Plas Corporation, Berry Sterling Corporation, AeroCon, Inc., PackerWare Corporation, Berry Plastics Design Corporation and United States Trust Company of New York, as trustee (filed as Exhibit 4.13 to the 2000 Form 10-K and incorporated herein by reference) 4.14 Tenth Supplemental Indenture to the 1994 Indenture dated as of October 2, 2000 among the Company, Holding, Berry Iowa Corporation, Berry Tri-Plas Corporation, Berry Sterling Corporation, AeroCon, Inc., PackerWare Corporation, Berry Plastics Design Corporation, Venture Packaging, Inc., Berry Plastics Technical Services, Inc., Venture Packaging Midwest, Inc., NIM Holdings Limited, Berry Plastics U.K. Limited, Norwich Acquisition Limited, Knight Plastics, Inc., CPI Holding Corporation, Cardinal Packaging, Inc., Poly-Seal Corporation, Berry Plastics Acquisition Corporation II, Berry Plastics Acquisition Corporation III and United States Trust Company of New York, as trustee (collectively, the "1994 Indenture Parties") (together with a schedule of previous supplemental indentures to the 1994 Indenture) (filed as Exhibit 4.14 to the 2000 Form 10-K and incorporated herein by reference) 4.15 Fourth Supplemental Indenture to the 1998 Indenture dated as of October 2, 2000 among the Company, Holding, Berry Iowa Corporation, Berry Tri-Plas Corporation, Berry Sterling Corporation, AeroCon, Inc., PackerWare Corporation, Berry Plastics Design Corporation, Venture Packaging, Inc., Berry Plastics Technical Services, Inc., Venture Packaging Midwest, Inc., NIM Holdings Limited, Berry Plastics U.K. Limited, Norwich Acquisition Limited, Knight Plastics, Inc., CPI Holding Corporation, Cardinal Packaging, Inc., Poly-Seal Corporation, Berry Plastics Acquisition Corporation II, Berry Plastics Acquisition Corporation III and United States Trust Company of New York, as trustee (collectively, the "1998 Indenture Parties") (together with a schedule of previous supplemental indentures to the 1998 Indenture) (filed as Exhibit 4.15 to the 2000 Form 10-K and incorporated herein by reference) 4.16 Second Supplemental Indenture to the 1999 Indenture dated as of October 2, 2000 among the Company, Holding, Berry Iowa Corporation, Berry Tri-Plas Corporation, Berry Sterling Corporation, AeroCon, Inc., PackerWare Corporation, Berry Plastics Design Corporation, Venture Packaging, Inc., Berry Plastics Technical Services, Inc., Venture Packaging Midwest, Inc., NIM Holdings Limited, Berry Plastics U.K. Limited, Norwich Acquisition Limited, Knight Plastics, Inc., CPI Holding Corporation, Cardinal Packaging, Inc., Poly-Seal Corporation, Berry Plastics Acquisition Corporation II, Berry Plastics Acquisition Corporation III and United States Trust Company of New York, as trustee (collectively, the "1999 Indenture Parties") (together with a schedule of previous supplemental indentures to the 1999 Indenture) (filed as Exhibit 4.16 to the 2000 Form 10-K and incorporated herein by reference) *4.17 Eleventh Supplemental Indenture to the 1994 Indenture dated as of May 14, 2001, among the 1994 Indenture Parties, CBP Holdings, S.r.l., Capsol Berry Plastics S.p.a., Ociesse S.r.l. and Pescor, Inc. *4.18 Fifth Supplemental Indenture to the 1998 Indenture dated as of May 14, 2001, among the 1998 Indenture Parties, CBP Holdings, S.r.l., Capsol Berry Plastics S.p.a., Ociesse S.r.l. and Pescor, Inc. *4.19 Third Supplemental Indenture to the 1999 Indenture dated as of May 14, 2001, among the 1999 Indenture Parties, CBP Holdings, S.r.l., Capsol Berry Plastics S.p.a., Ociesse S.r.l. and Pescor, Inc. 10.1 Third Amended and Restated Financing and Security Agreement dated as of May 9, 2000, by and among the Company, NIM Holdings, Berry Plastics U.K. Limited, Bank of America, N.A., Fleet Capital Corporation, General Electric Capital Corporation, Heller Financial, Inc., PNC Bank, N.A., LaSalle Business Credit, Inc. and certain other lenders listed therein (the "Third Amended and Restated Financing Agreement") (filed as Exhibit 10.1 to the 2000 Form 10-K filed on March 30, 2001 and incorporated herein by reference) 10.2 Employment Agreement dated December 24, 1990, as amended, between the Company and Martin R. Imbler ("Imbler") (filed as Exhibit 10.9 to the Form S-1 and incorporated herein by reference) 10.3 Amendment to Imbler Employment Agreement dated November 30, 1995 (filed as Exhibit 10.6 to the 1995 Form 10-K and incorporated herein by reference) 10.4 Amendment to Imbler Employment Agreement dated June 30, 1996 (filed as Exhibit 10.4 to the 1996 Form S-4 and incorporated herein by reference) 10.5 Employment Agreement dated December 24, 1990, as amended, between the Company and R. Brent Beeler ("Beeler") (filed as Exhibit 10.10 to the Form S-1 and incorporated herein by reference) 10.6 Amendment to Beeler Employment Agreement dated November 30, 1995 (filed as Exhibit 10.8 to the 1995 Form 10-K and incorporated herein by reference) 10.7 Amendment to Beeler Employment Agreement dated June 30, 1996 (filed as Exhibit 10.7 to the 1996 Form S-4 and incorporated herein by reference) 10.8 Employment Agreement dated December 24, 1990, as amended, between the Company and James M. Kratochvil ("Kratochvil") (filed as Exhibit 10.12 to the Form S-1 and incorporated herein by reference) 10.9 Amendment to Kratochvil Employment Agreement dated November 30, 1995 (filed as Exhibit 10.12 to the 1995 Form 10-K and incorporated herein by reference) 10.10 Amendment to Kratochvil Employment Agreement dated June 30, 1996 (filed as Exhibit 10.13 to the 1996 Form S-4 and incorporated herein by reference) 10.11 Employment Agreement dated as of January 1, 1993, between the Company and Ira G. Boots ("Boots") (filed as Exhibit 10.13 to the Form S-1 and incorporated herein by reference) 10.12 Amendment to Boots Employment Agreement dated November 30, 1995 (filed as Exhibit 10.14 to the 1995 Form 10-K and incorporated herein by reference) 10.13 Amendment to Boots Employment Agreement dated June 30, 1996 (filed as Exhibit 10.16 to the 1996 Form S-4 and incorporated herein by reference) 10.14 Employment Agreement dated as of January 21, 1997, between the Company and Bruce J. Sims ("Sims") (filed as Exhibit 10.14 to the 1999 Form 10-K and incorporated herein by reference) 10.15 Financing Agreement dated as of April 1, 1991, between the City of Henderson, Nevada Public Improvement Trust and the Company (including exhibits) (filed as Exhibit 10.17 to the Form S-1 and incorporated herein by reference) 10.16 Letter of Credit of NationsBank, N.A. dated April 16, 1997 (filed as Exhibit 10.15 to the 1998 Amended Form S-4 and incorporated herein by reference) 10.17 Stockholders Agreement dated as of June 18, 1996, among Holding, Atlantic Equity Partners International II, L.P., CVCA and the other parties thereto (filed as Exhibit 10.23 to the 1996 Form S-4 and incorporated herein by reference) 10.18 Amended and Restated Warrant to purchase Class B Common Stock of Holding dated May 9, 2000, issued to JPMP(SBIC) (Warrant No. 5) (filed as Exhibit 4.4 to the Current Report on Form 8-K filed May 9, 2000 and incorporated herein by reference) 10.19 Amended and Restated Warrant to purchase Class B Common Stock of Holding dated May 9, 2000, issued to JPMP(SBIC) (Warrant No. 6) (filed as Exhibit 4.5 to the Current Report on Form 8-K filed May 9, 2000 and incorporated herein by reference) 10.20 Amended and Restated Warrant to purchase Class B Common Stock of Holding dated May 9, 2000, issued to The Northwestern Mutual Life Insurance Company (Warrant No. 7) (filed as Exhibit 4.6 to the Current Report on Form 8-K filed May 9, 2000 and incorporated herein by reference) 10.21 Amended and Restated Warrant to purchase Class B Common Stock of Holding dated May 9, 2000, issued to The Northwestern Mutual Life Insurance Company (Warrant No. 8) (filed as Exhibit 4.7 to the Current Report on Form 8-K filed May 9, 2000 and incorporated herein by reference) 10.22 Amended and Restated Stockholders Agreement dated June 18, 1996, among Holding and certain stockholders of Holding (filed as Exhibit 10.28 to the 1996 Form S-4 and incorporated herein by reference) 10.23 Second Amended and Restated Management Agreement dated June 18, 1996, between First Atlantic Capital, Ltd. and the Company (filed as Exhibit 10.29 to the 1996 Form S-4 and incorporated herein by reference) 10.24 Warrant to purchase Class B Non-Voting Common Stock of BPC Holding Corporation, dated August 29, 1997, issued to Willard J. Rathbun (filed as Exhibit 10.30 to the 1997 Form 10-K and incorporated herein by reference) 10.25 Warrant to purchase Class B Non-Voting Common Stock of BPC Holding Corporation, dated August 29, 1997, issued to Craig Rathbun (filed as Exhibit 10.31 to the 1997 Form 10-K and incorporated herein by reference) 10.26 Amended and Restated Tax Sharing Agreement dated March 15, 2001, between BPC Holding Corporation and its subsidiaries (filed as Exhibit 10.26 to the 2000 Form 10-K and incorporated herein by reference) 10.27 First Amendment to the Stockholders Agreement dated May 9, 2000 among Holding, Atlantic Equity Partners International II, L.P., JPMP(SBIC) and the other parties thereto (filed as Exhibit 10.27 to the 2000 Form 10-K and incorporated herein by reference) 10.28 Warrant to purchase Class B Nonvoting Common Stock of Holding dated May 9, 2000, issued to JPMP(SBIC) (Warrant No. CBNV No. 1) (filed as Exhibit 4.2 to the Current Report on Form 8-K filed May 9, 2000 and incorporated herein by reference) 10.29 Warrant to purchase Class B Nonvoting Common Stock of Holding dated May 9, 2000, issued to The Northwestern Mutual Life Insurance Company (Warrant No. CBNV No. 2) (filed as Exhibit 4.3 to the Current Report on Form 8-K filed May 9, 2000 and incorporated herein by reference) 10.30 Series A-1 Preferred Stock Purchase Agreement dated as of May 9, 2000 among Holding, JPMP(SBIC) and the Northwestern Mutual Life Insurance Company (filed as Exhibit 4.1 to the Current Report on Form 8-K filed May 9, 2000 and incorporated herein by reference) 10.31 First Amendment to the Third Amended and Restated Financing Agreement (filed as Exhibit 10.31 to the 2000 Form 10-K and incorporated herein by reference) 10.32 Second Amendment to the Third Amended and Restated Financing Agreement (filed as Exhibit 10.32 to the 2000 Form 10-K and incorporated herein by reference) 10.33 Loan and Security Agreement, dated July 17, 2000 by and among Berry, General Electric Capital Corporation and certain other lenders listed therein (filed as Exhibit 10.33 to the 2000 Form 10- K and incorporated herein by reference) 10.34 Letter Agreement, dated July 5, 2001 between Martin R. Imbler and Berry Plastics Corporation (filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q filed on August 13, 2001 and incorporated herein by reference) *10.35 Third Amendment to the Third Amended and Restated Financing Agreement *10.36 First Amendment to the Loan and Security Agreement *21 List of subsidiaries
* Filed herewith.