-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OgPsv2Uao2lvo8cwx/Phx/3D2yIeWcETaXlbAjYgHU3aAVbL680802cfAz/+NLFR 6++HjToSvpWMknggJ/q0vw== 0000919463-97-000005.txt : 19970409 0000919463-97-000005.hdr.sgml : 19970409 ACCESSION NUMBER: 0000919463-97-000005 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970121 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970407 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BERRY PLASTICS CORP CENTRAL INDEX KEY: 0000919463 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 351813706 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 033-75706 FILM NUMBER: 97575911 BUSINESS ADDRESS: STREET 1: 101 OAKLEY ST CITY: EVANSVILLE STATE: IN ZIP: 47710 BUSINESS PHONE: 8124242904 MAIL ADDRESS: STREET 1: PO BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47706-0959 8-K/A 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported) JANUARY 21, 1997 Berry Plastics Corporation (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER) Delaware 33-75706 35-1813706 (STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.) 101 Oakley Street Evansville, Indiana 47710 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) Registrant's telephone number, including area code (812) 424-2904 (FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT) AMENDMENT NO. 1 The undersigned registrant hereby amends the following items, financial statements, exhibits or other portions of its Current Report on Form 8-K, Date of Report January 21, 1997, and filed February 4, 1997, as set forth in the pages attached hereto: ITEM 7 (A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED Audited Financial Statements of PackerWare Corporation for the year ended October 31, 1996: Independent Accountants' Report of Baird, Kurtz and Dobson Balance Sheet Statement of Income Statement of changes in Stockholders' Equity Statement of Cash Flows Notes to Financial Statements Audited Balance Sheet of PackerWare Corporation as of January 21, 1997: Report of Ernst & Young LLP, Independent Auditors Balance Sheet Notes to Balance Sheet Unaudited Statements of Operations and Cash Flows of PackerWare Corporation for the period from November 1, 1996 to January 21, 1997: Statements of Operations Statement of Cash Flow Note to Statements of Operation and Cash Flow ITEM 7 (B) PRO FORMA FINANCIAL INFORMATION ProForma Unaudited Condensed Financial Statements of BPC Holding Corporation for the year ended December 28, 1996: Pro Forma Unaudited Condensed Consolidated Balance Sheet Notes to Pro Forma Unaudited Condensed Consolidated Balance Sheet Pro Forma Unaudited Condensed Consolidated Statement of Operations Notes to Pro Forma Unaudited Condensed Consolidated Statement of Operations Unaudited Pro Forma Financial Information of Berry Plastics Corporation SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized. BERRY PLASTICS CORPORATION By: /S/ JAMES M. KRATOCHVIL James M. Kratochvil Vice President, Chief Financial Officer, Treasurer and Secretary Dated: April 7, 1997 PACKERWARE CORPORATION Accountants' Report and Financial Statements October 31, 1996 PACKERWARE CORPORATION OCTOBER 31, 1996 CONTENTS PAGE INDEPENDENT ACCOUNTANTS' REPORT 1 FINANCIAL STATEMENTS Balance Sheet 2 Statement of Income 3 Statement of Changes in Stockholders' Equity 4 Statement of Cash Flows 5 Notes to Financial Statements 6 INDEPENDENT ACCOUNTANTS' REPORT Board of Directors PackerWare Corporation Lawrence, Kansas We have audited the accompanying balance sheet of PACKERWARE CORPORATION as of October 31, 1996, and the related statements of income, changes in stockholders' equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. 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 audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of PACKERWARE CORPORATION as of October 31, 1996, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. As discussed in Note 8, in 1996 the Company changed its method of accounting for the Employee Stock Ownership Plan by retroactively restating prior years' financial statements. By /s/ BAIRD, KURTZ & DOBSON --------------------------------- BAIRD, KURTZ & DOBSON Kansas City, Missouri December 23, 1996, except for Note 12, as to which the date is January 21, 1997 BALANCE SHEET OCTOBER 31, 1996 ASSETS
CURRENT ASSETS Cash $ 22,034 Accounts receivable - trade, less allowance for doubtful accounts of $61,648 4,541,901 Inventories 7,536,702 Deferred income taxes 640,000 Prepaid expenses 146,316 Refundable income taxes ------------ Total Current Assets 12,886,953 ------------ RESTRICTED CASH DEPOSITS 13,867 ------------ PROPERTY AND EQUIPMENT, At cost Land 333,979 Buildings and improvements 9,375,285 Equipment 36,919,938 Furniture and fixtures 1,429,661 Automobiles and trucks 114,629 Leasehold improvements 544,989 Molds in process 660,506 ------------ 49,378,987 Less accumulated depreciation 34,753,686 ------------ 14,625,301 OTHER ASSETS Deposits 22,188 Long-term bond origination costs (net of accumulated amortization of $491,556) 35,277 Receivable - employees 4,701 Cash surrender value of life insurance, net of policy loans of $14,866 301,202 ------------ 363,368 ------------ $27,889,489 ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES Current maturities of long-term debt $ 7,836,935 Checks released in excess of available cash balances 445,947 Accounts payable 3,167,310 Accrued expenses 1,467,317 Accrued vacation 485,800 Income taxes payable 104,000 ------------ Total Current Liabilities 13,507,309 ------------ DEFERRED INCOME TAXES 604,090 ------------ EMPLOYEE STOCK OWNERSHIP PLAN OBLIGATION, Less current maturities 6,480,000 ------------ STOCKHOLDERS' EQUITY Common stock, par value $.10 per share; authorized 2,000,000 shares, issued 911,900 shares 91,190 Additional paid-in capital 5,465,143 ------------ Retained earnings 7,238,332 12,794,665 Less: Treasury stock, at cost, 211,912 shares, (1,696,575) Unearned ESOP shares (3,800,000) ------------ 7,298,090 ------------ $27,889,489 ============
STATEMENT OF INCOME YEAR ENDED OCTOBER 31, 1996
NET SALES $42,818,096 COST OF GOODS SOLD 36,521,062 ------------ GROSS PROFIT 6,297,034 ------------ OPERATING EXPENSES Selling 2,456,240 General and administrative 2,316,472 ------------ 4,772,712 ------------ INCOME FROM OPERATIONS 1,524,322 ------------ OTHER INCOME (EXPENSE) Interest income 15,766 Interest expense (908,958) ESOP interest expense (576,386) Gain on sale of property and equipment 466,673 Other (40,729) ------------ (1,043,634) ------------ INCOME BEFORE INCOME TAXES 480,688 PROVISION FOR INCOME TAXES 243,000 ------------ NET INCOME $ 237,688 ============
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY YEAR ENDED OCTOBER 31, 1996
Additional Unearned Common Paid-in Retained Treasury ESOP STOCK CAPITAL EARNINGS STOCK SHARES ------- ---------- ------------ ----------- ----------- BALANCE, OCTOBER 31, 1995 $9,190 $5,992,143 $ 9,316,644 $(1,576,425) $(7,010,000) Adjustment applicable to prior years for adoption of SOP 93-6, Employers' Accounting for Employee Stock Ownership Plans (254,000) (2,316,000) - 2,570,000 ------- ---------- ------------ ----------- ----------- BALANCE, OCTOBER 31, 1995, AS RESTATED 9,190 5,738,143 7,000,644 (1,576,425) (4,440,000) Net income 237,688 Purchase of treasury stock (120,150) ESOP shares released, net of taxes (273,000) 640,000 ------- ---------- ------------ ----------- ----------- BALANCE, OCTOBER 31, 1996 $9,190 $5,465,143 $ 7,238,332 $(1,696,575) $(3,800,000) ======= ========== ============ =========== ===========
STATEMENT OF CASH FLOWS YEAR ENDED OCTOBER 31, 1996
CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 237,688 Items not requiring (providing) cash: Depreciation and amortization 3,341,551 Gain on sale of assets (466,673) Deferred income taxes 169,000 Write-off of investment in affiliate 50,000 ESOP expense 192,000 Changes in: Accounts receivable 678,559 Inventories (1,977,044) Income taxes payable 411,898 Prepaid expenses (78,113) Checks released in excess of available cash balances 11,587 Accounts payable 10,569 Accrued expenses 55,086 ------------ Net cash provided by operating activities 2,636,108 ------------ CASH FLOWS FROM INVESTING ACTIVITIES Decrease in restricted cash 292,396 Purchases of property and equipment (2,149,171) Proceeds from sale of property and equipment 589,200 Increase in cash surrender value of officers' life insurance (18,830) Change in advances to employees 609 Change in escrow deposits 25,532 ------------ Net cash used in investing activities (1,260,264) ------------ CASH FLOWS FROM FINANCING ACTIVITIES Net borrowings on line-of-credit agreement 672,195 Proceeds from issuance of long-term debt 1,400,000 Principal payments on long-term debt (2,938,939) Payments to acquire treasury stock (120,150) Payment of ESOP debt (530,000) ------------ Net cash used in financing activities (1,516,894) ------------ DECREASE IN CASH (141,050) CASH, BEGINNING OF YEAR 163,084 ------------ CASH, END OF YEAR $ 22,034
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS The Company earns revenues primarily from manufacturing and selling of various plastic products, including products for various retail organizations and certain containers for the food service industry. The Company extends unsecured credit to its customers in the normal course of business. INVENTORY PRICING All inventories are stated at the lower of standard cost, which approximates cost determined using the FIFO (first-in, first-out) method, or market. The Company provides an allowance for slow-moving inventory based on its experience and annual product usage. PROPERTY AND EQUIPMENT Property and equipment are depreciated over the estimated useful life of each asset. Leasehold improvements are depreciated over the shorter of the lease term or the estimated useful lives of the improvements. Annual depreciation is computed using straight-line and accelerated methods. BOND ORIGINATION COSTS Bond origination costs are being amortized over the life of the underlying bond issues using a method that approximates the interest method. WORKERS' COMPENSATION INSURANCE The Company is partially self-insured with respect to workers' compensation insurance coverage. Additionally, the Company purchases "excess" insurance for workers' compensation coverage. Currently under this policy, the Company is liable for the first $175,000 on individual claims, not to exceed an annual aggregate amount of $521,200. Also, the "excess" insurance policy has a total annual aggregate coverage limit of $5,000,000. INCOME TAXES Deferred tax liabilities and assets are recognized for the tax effects of differences between financial statement and tax bases of assets and liabilities. A valuation allowance is established to reduce deferred tax assets if it is more likely than not that a deferred tax asset will not be realized. INDUSTRIAL REVENUE BONDS Industrial revenue bonds, upon which the Company is obligated to pay principal and interest under lease obligations providing for the transfer of ownership to the Company upon the satisfaction of the bond obligations, have been recorded as though the Company were the issuer of the bonds. CERTAIN SIGNIFICANT ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE 2: RESTRICTED CASH DEPOSITS Included in restricted cash are the remaining proceeds from the March 1, 1993, September 1, 1992 and April 15, 1991, Industrial Revenue Bond issues, which are restricted to future equipment acquisition and funds escrowed toward principal and interest payments on the bonds. Investment of the underlying funds is directed by the Company. NOTE 3: INVENTORIES Inventories at October 31, 1996 consisted of the following:
Raw materials $ 669,053 Supplies 984,652 Finished goods 6,199,167 ----------- 7,852,872 Allowance for slow-moving inventory (316,170) ----------- $7,536,702 ===========
NOTE 4: LONG-TERM DEBT
Industrial Revenue Bonds (A) $1,655,000 Installment notes payable (B) 1,269,304 Notes payable, stockholder (C) 197,359 Revolving credit agreement (D) 4,542,084 Other 173,188 ----------- 7,836,935 Less current maturities 1,793,723 ----------- $6,043,212 ===========
(A) Obligations issued by the City of Lawrence, Kansas; maturing serially through April 2002; the bond series outstanding are: Series 4/15/91 - 9.75% to 10.10%; 10-year bonds, Series 9/1/92 - 6.5% to 9%; Series A, 3/1/93 - 6.3% to 9%; Series 4/15/91 bonds were refinanced and paid in full through borrowings described in (D) during 1996. The bonds are collateralized by buildings and equipment. (B) Payable to finance company and due 2002; payable in monthly installments of $29,540, including interest at 9.7%; collateralized by equipment. (C) Payable to stockholder and due 1996; payable in variable monthly installments, including interest at 8%; unsecured; subordinated to line of credit (F) and ESOP obligation (SEE NOTE 8). During 1995, the Company purchased 20,000 shares of outstanding common stock from the stockholder for $300,000 in exchange for the note payable. (D) Provides for borrowing up to $4,000,000 and $1,950,000 under separate line-of-credit agreements pursuant to extension agreement; due January 31, 1998, plus interest at prime plus 1.5% and 2.5%, respectively, payable monthly; collateralized by substantially all of the Company's assets; requires maintenance of Company's primary cash accounts with the bank, maintenance of minimum level of stockholders' equity, restricts the purchase and disposition of certain assets or changes in corporate ownership of the Company, requires maintenance of minimum debt service coverage and minimum levels of tangible net worth. In connection with the change in control (SEE NOTE 12), all of the above debt was paid in full subsequent to year end and, therefore, is classified as current in the accompanying balance sheet. NOTE 4: LONG-TERM DEBT (CONTINUED) On October 31, 1994, the Company sold property which represented collateral on the Series 1993B Revenue Bonds. The net proceeds of $2,077,393 (after payment of $512,607 in underwriting fees, taxes and other selling costs) were used to purchase U.S. Government securities. Those securities were deposited in a trust with an escrow agent to provide for all future debt service payments on the 1993B Series Bonds. As a result, the 1993B Series Bonds are considered to be defeased and the liability for those bonds amounting to $1,815,000 at October 31, 1996 is not shown on the balance sheet. NOTE 5: OPERATING LEASES The Company has entered into several noncancellable leases for various buildings and equipment. Future minimum lease payments under these leases at October 31, 1996 are as follows:
1997 $ 323,310 1998 293,151 1999 279,632 2000 273,888 2001 273,888 Thereafter 727,488 ---------- $2,171,357 ==========
Included in future minimum lease payments under noncancellable operating leases are payments of $68,688 annually to the majority stockholder of the Company for rental of certain buildings and equipment. The leases expire in 1997 and 2002. All lease payments are charged to operations as incurred. Total rents charged to operations under all operating leases were $471,773 for 1996. NOTE 6: INCOME TAXES The provision for income taxes includes these components:
Taxes currently payable $249,000 Deferred income taxes (6,000) -------- $243,000 ========
NOTE 6: INCOME TAXES (CONTINUED) A reconciliation of income tax expense at the statutory rate to income tax expense at the Company's effective rate is shown below:
Computed at the statutory rate (34%) $163,500 (Increase) decrease in tax benefit resulting from: Change in deferred tax asset valuation allowance 2,000 Nondeductible expenses 2,000 Change in estimate of prior year's tax 67,500 Other 8,000 -------- Actual tax provision (credit) $243,000 ========
The tax effects of temporary differences related to deferred taxes shown on the balance sheet are as follows:
Deferred tax assets: Unearned ESOP shares $ 1,045,000 Alternative minimum tax credits 590,000 Inventory pricing and reserves 313,000 Net operating loss carryforwards 337,000 Accrued compensation 245,000 Workers' compensation reserve 78,000 Allowance for doubtful accounts 23,000 Loss on debt defeasance 1,000 --------- 2,632,000 --------- Deferred tax liabilities: Accumulated depreciation (1,448,000) Other (44,090) --------- (1,492,090) Net deferred tax asset before valuation allowance 1,139,910 Valuation allowance: Beginning balance (1,102,000) Increase during the period (2,000) --------- Ending balance (1,104,000) Net deferred tax asset $ 35,910 =========
NOTE 6: INCOME TAXES (CONTINUED) The net deferred tax asset is presented on the balance sheet as follows:
Deferred tax asset - current $ 640,000 Deferred tax liability - long-term (604,090) --------- Net deferred tax asset $ 35,910
The Company has available at October 31, 1996, unused operating loss carryforwards of approximately $590,000 for federal income tax purposes and $3,600,000 for state income tax purposes which expire in the years 2008 through 2010. The Company also has alternative minimum tax credits of approximately $590,000 available to offset future federal income taxes. The credits have no expiration date. NOTE 7: PROFIT SHARING PLAN The Company has a profit sharing plan covering substantially all employees. The Company's contributions to the plan are determined annually by the Board of Directors. Contributions are limited to the maximum amount allowable as a deduction under the Internal Revenue Code. The contribution to the plan for the year ended October 31, 1996 was $78,300. NOTE 8: EMPLOYEE STOCK OWNERSHIP PLAN AND RESTATEMENT OF PRIOR YEARS' FINANCIAL STATEMENTS The Company has an employee stock ownership plan (ESOP) to invest in the Company's common stock for the benefit of eligible employees. The Company makes annual contributions to the plan as determined by the Board of Directors, limited to 25% of eligible employee compensation, plus principal and interest paid on the related debt. Contributions to the plan were $1,106,386 for the year ended October 31, 1996, including $448,000 which has been accounted for as a reduction in additional paid-in capital, and $530,000 in ESOP debt principal reduction. $640,000 has been accounted for as a reduction in unearned shares in the stockholders' equity section of the accompanying balance sheet. The remaining contributions are reported in the accompanying income statement as compensation expense of $192,000, included as components of operating expenses and cost of goods sold, as well as interest expense of $576,386. In prior years, the Company recorded ESOP expense as the amount contributed to the plan for the year. During 1996, the Company retroactively changed its method of determining ESOP expense in accordance with Statement of Position (SOP) 93-6, EMPLOYERS' ACCOUNTING FOR EMPLOYEE STOCK OWNERSHIP PLANS. Accordingly, the debt of the ESOP is recorded as debt and the shares pledged as collateral are reported as unearned ESOP shares in the balance sheet. As shares are released from collateral, the Company reports compensation expense equal to the current market price of the shares. Adjustments applicable to 1995 and prior, less income tax effects, have been included in restated 1996 beginning additional paid-in capital, retained earnings and unearned ESOP shares balances. This change had no effect on total beginning stockholders' equity. NOTE 8: EMPLOYEE STOCK OWNERSHIP PLAN AND RESTATEMENT OF PRIOR YEARS' FINANCIAL STATEMENTS (CONTINUED) Through an employee stock ownership trust (ESOT), which was established to fund the ESOP, 250,000 shares of common stock were acquired for $10,000,000 using the proceeds of a special-purpose bank loan to the ESOT. The Company has guaranteed the repayment of the loan to the ESOT. Under the guarantee agreement, the Company is obligated to make contributions to the ESOT to enable it to make similar payments against the bank loan. The loan is payable over ten years with varying monthly installments of principal plus interest. The note bears interest at a base rate (8.25% at October 31, 1996). The Company has pledged substantially all of its assets as collateral for the ESOT loan. The loan agreement also requires the Company to maintain a minimum level of stockholders' equity, restricts the purchase and disposition of certain assets or changes in corporate ownership of the Company, requires maintenance of minimum debt service coverage and requires minimum levels of tangible net worth. The Company is in technical noncompliance with certain covenants contained in the agreement; however, this debt was paid in full subsequent to year end and replaced with long-term debt in connection with the change in control (SEE NOTE 12). For financial reporting purposes, the outstanding ESOT obligation has been reflected as a liability with stockholders' equity reduced by the unearned ESOP shares.
The principal balance of the ESOT note matures as follows: 1998 $6,480,000 ========== The ESOP shares at October 31, 1996 are as follows: Shares released for allocation 109,990 Unreleased shares 94,977 ---------- Total ESOP shares 204,967 ========== Estimated fair value of unreleased shares based on most recent valuation prepared by John M. Kultgen, April 1, 1996 $1,139,724 ==========
NOTE 9: CONTINGENCIES There are various legal proceedings involving the Company. Management considers that the aggregate liabilities, if any, arising from such actions would not have a material adverse effect on the financial position or operations of the Company. NOTE 10: STOCK OPTION PLAN During 1995, the Company adopted a stock option plan which permits the issuance of options to selected employees and independent contractors of the Company. The plan reserves 50,000 shares of common stock for grant and provides that the term of each award be determined by the committee of the Board of Directors (Committee) charged with administering the plan. Under the terms of the plan, options granted may be either nonqualified or incentive stock options and the exercise price, determined by the Committee, may not be less than the fair market value of a share on the date of grant. Incentive stock options granted to an optionee owning more than 10% of the voting power of all classes of the Company's stock will not be less than 110% of the fair market value of such stock. Options granted under the plan are exercisable in installments determined by the Committee. At October 31, 1996, the Company had 15,000 options outstanding at an exercise price of $12; 1,000 options are currently exercisable; and 35,000 options are available for grant. NOTE 11: SIGNIFICANT ESTIMATES AND CONCENTRATIONS Generally accepted accounting principles require the disclosure of certain significant estimates and current vulnerabilities due to certain concentrations. Those matters include the following: MAJOR CUSTOMER Approximately 22% of the Company's total revenue for the year ended October 31, 1996 was from one customer. Additionally, two customers' accounts receivable balances amounted to approximately 28% of accounts receivable for the year ended October 31, 1996. SELF INSURANCE The Company is partially self-insured with respect to workers' compensation insurance coverage. The Company accrues the expense of covered claims plus unasserted claims and unreported incidents occurring during the year based on estimates of the probable total cost of any related claims. Such estimates are calculated by the Company's insurance agency and are based on the Company's own claims experience. Claim payments based on actual 1996 claims ultimately filed could differ materially from these estimates. RESERVE FOR SLOW-MOVING INVENTORY At October 31, 1996, the Company had inventory quantities that exceeded the Company's current year sales volume for certain products. Management has reduced the inventory carrying value by recording an allowance of $316,170 and developed plans to lower inventory levels for such items in the next year. The amount of ultimate loss could differ materially from management's estimates. NOTE 11: SIGNIFICANT ESTIMATES AND CONCENTRATIONS (CONTINUED) ALLOWANCES FOR DOUBTFUL ACCOUNTS The Company has recorded an allowance for doubtful accounts related to accounts receivable of $61,648 at October 31, 1996, which management believes to be adequate based on information currently available. However, the amount ultimately collected could differ materially from the carrying amount reflected in these financial statements. NOTE 12: CHANGE IN CONTROL During 1996, the Company's stockholders and its Board of Directors approved the sale of all of their stock ownership in the Company. The sale closed on January 21, 1997, and the related debt of the Company was refinanced with long- term debt. The amounts shown in the accompanying balance sheet do not reflect any effect of the purchase price allocations which might be made by the buyer. NOTE 13: ADDITIONAL CASH FLOWS INFORMATION
ADDITIONAL CASH INFORMATION Interest paid $ 851,132 Income taxes paid (refunded) (337,898)
Balance Sheet PackerWare Corporation AS OF JANUARY 21, 1997 WITH REPORT OF INDEPENDENT AUDITORS PackerWare Corporation Balance Sheet January 21, 1997 CONTENTS Report of Independent Auditors...........................1 Audited Balance Sheet Balance Sheet.............................................2 Notes to Balance Sheet....................................4 Report of Independent Auditors The Stockholders PackerWare Corporation We have audited the accompanying balance sheet of PackerWare Corporation as of January 21, 1997. This balance sheet is the responsibility of the Company's management. Our responsibility is to express an opinion on this balance sheet based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the balance sheet is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the balance sheet. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall balance sheet presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the balance sheet referred to above presents fairly, in all material respects, the financial position PackerWare Corporation as of January 21, 1997, in conformity with generally accepted accounting principles. Ernst & Young, LLP Indianapolis, Indiana February 21, 1997 PackerWare Corporation Balance Sheet January 21, 1997
ASSETS (NOTE 3) Current assets: Cash and cash equivalents $ 132,799 Accounts receivable, less allowance for doubtful accounts of $72,088 2,990,363 Inventories: Finished goods, less allowance for slow moving items of $917,010 8,147,049 Raw materials and supplies, less allowance for slow moving items of $182,715 1,631,364 -------------- 9,778,413 Prepaid expenses and other receivables 80,711 -------------- Total current assets 12,982,286 Property and equipment (Note 3): Land 333,980 Buildings and improvements 9,920,275 Machinery, equipment and tooling 37,068,314 Furniture and fixtures 1,441,821 Automobiles and trucks 114,629 Construction in progress 855,762 -------------- 49,734,781 Less accumulated depreciation (35,786,026) -------------- 13,948,755 -------------- Cash surrender value of life insurance 313,847 Deferred income taxes 599,687 Other assets 167,624 -------------- Total assets $ 28,012,199 ==============
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 5,678,499 Accrued expenses and other liabilities 746,102 Employee compensation and payroll taxes 862,333 Income taxes payable 4,000 Current portion of long-term debt (NOTE 3) 8,158,540 ESOP debt (NOTE 6) 6,435,000 -------------- Total current liabilities 21,884,474 Long-term debt (NOTE 3) 451,496 Stockholders' equity: Common stock; $.10 par value; Authorized: 2,000,000 shares Issued: 911,900 shares 91,190 Additional paid-in capital 5,465,143 Retained earnings 5,574,418 Treasury stock at cost, 211,651 shares (1,699,522) Unearned ESOP shares (NOTE 6) (3,755,000) -------------- Total stockholders' equity 5,676,229 Total liabilities and stockholders' equity $ 28,012,199 ==============
SEE ACCOMPANYING NOTES. PackerWare Corporation Notes to Balance Sheet January 21, 1997 1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION NATURE OF OPERATIONS PackerWare Corporation (the "Company") manufactures various injection molded plastic containers, drink cups, housewares, and lawn and garden products in manufacturing facilities in Lawrence, Kansas and Reno, Nevada. The Company's customers are located principally throughout the United States and are primarily comprised of retail organizations and companies operating in the food service industry. Amounts due from five customers comprised 36% of the accounts receivable balance as of January 21, 1997. The Company generally does not require collateral and reviews accounts periodically for collectibility and writes off accounts deemed uncollectible. Various densities of plastic resin represent the most significant portion of the Company's raw materials. The Company does not anticipate any material difficulty in obtaining an uninterrupted supply of these resins at competitive prices in the near future. However, should a significant shortage of the supply of resin occur, both the price and availability of the principal raw material used in the manufacture of the Company's products could lead to financial disruption to the Company. PREPARATION OF BALANCE SHEET The balance sheet has been prepared as of January 21, 1997, immediately prior to the closing of the acquisition of the Company by Berry Plastics Corporation (see Note 8). Accordingly, the balance sheet reflects the assets, liabilities and stockholders' equity using the accounting polices of the Company which follow. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. PackerWare Corporation Notes to Balance Sheet (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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 3 to 35 years. USE OF ESTIMATES The preparation of the balance sheet in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the balance sheet and accompanying notes. Actual amounts could differ from those estimates. 3. LONG-TERM DEBT Long-term debt consists of the following:
Lines of credit $ 5,390,667 City of Lawrence, Kansas Industrial Revenue Bonds 1,655,000 Note payable, finance company 1,230,590 Note payable, stockholder 193,742 Note payable, finance company 113,726 Note payable, finance company 26,311 ----------- 8,610,036 Less current portion 8,158,540 ----------- $ 451,496 ===========
The lines of credit represent borrowings of $4,000,000 and $1,390,667 under separate line of credit arrangements with the same bank which permit borrowings of up to $4,000,000 and $1,950,000, respectively. Both loans mature on January 31, 1997 with interest which accrues at the bank's corporate base rate plus 1.5% (9.75% at January 21, 1997) and 2.5% (10.75% at January 21, 1997) on the $4,000,000 and $1,950,000 loans, respectively. The loans are collateralized by security agreements which cover substantially all of the Company's assets. Amounts may be drawn on the loans subject to a borrowing base described in the security agreements. PackerWare Corporation Notes to Balance Sheet (continued) 3. LONG-TERM DEBT (CONTINUED) The amount due under industrial revenue bonds represents $970,000 and $685,000 balances on initial issuances of $4,000,000 and $1,500,000, respectively. The bonds mature serially through April 2003 with annual payments ranging from $10,000 to $920,000 at interest rates ranging from 7.5% to 9.0%. The bonds are collateralized by specified buildings and equipment. The $1,230,590 note payable is the remaining balance on a $1,400,000 loan payable to a finance company. The note, which accrues interest at 370 basis points above the current three month treasury yield (9.7% at January 21, 1997) is payable in monthly installments of $29,540, including interest, with a final payment due in March 2001. The note is collateralized by machinery and equipment specified in a security agreement. In addition, the Company is required to meet certain financial covenants. As of January 21, 1997, the Company is in violation of at least one of these covenants. As such, all amounts payable under this note have been classified as current. The note payable to stockholder, which was due December 31, 1996, is the remaining portion of a $264,000 note executed July 1, 1995. The note is unsecured and is subordinate to the lines of credit and the ESOP obligation (see Note 6). The $113,726 note payable to a finance company is the remaining portion due under a $490,440 note which is collateralized by specified machinery and equipment. The note, which requires quarterly installments of $24,522 including interest, bears interest at 6.6% and matures in April 1998. The $26,311 note payable to a finance company is the remaining portion due under a $190,000 note which is collateralized by a security agreement which specifies certain machinery and equipment. The note, which requires monthly payments of $3,861 including interest, bears interest at 8.09% and matures in August 1998. PackerWare Corporation Notes to Balance Sheet (continued) 3. LONG-TERM DEBT (CONTINUED) Maturities of long-term debt for each of the following years ending January 21 are as follows:
1998 $ 8,158,540 1999 361,496 2000 20,000 2001 20,000 2002 20,000 Thereafter 30,000 ----------- $ 8,610,036 ===========
4. LEASES Certain property and equipment are leased under noncancellable operating leases. Future minimum lease payments under noncancellable operating leases for each of following years ended January 21 are as follows:
1998 $ 484,591 1999 467,658 2000 440,621 2001 342,988 2002 341,988 Thereafter 800,891 ----------- $ 2,878,737 ===========
Included in the future minimum lease payments above are payments under noncancellable operating leases to the majority stockholder of the Company or to a company which the majority stockholder of the Company owns an interest in. Future minimum lease payments under these noncancellables operating leases for each of the following years ended January 21 are as follows:
1998 $133,513 1999 127,188 2000 127,188 2001 116,188 2002 115,188 Thereafter 177,191 ----------- $796,456 ===========
PackerWare Corporation Notes to Balance Sheet (continued) 5. INCOME TAXES 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 assets and liabilities at January 21, 1997 are as follows:
Deferred tax assets: Inventory $ 790,086 Compensation and benefit accruals 248,108 Insurance reserves 87,985 Net operating loss carryforwards 720,501 Alternative minimum tax credit carryforwards 599,687 Other 43,687 ----------- 2,490,054 Valuation allowance (584,111) ----------- 1,905,943 Deferred tax liabilities: Tax depreciation in excess of book depreciation 1,306,256 ----------- Net deferred tax asset $ 599,687 ===========
As of January 21, 1997, the Company has unused operating loss carryforwards of approximately $1,271,000 for federal income tax purposes and $4,611,000 for state income tax purposes which begin expiring in 2008 and will fully expire in 2112. The Company also has alternative minimum tax credit carryforwards of approximately $600,000 which have no expiration date. 6. EMPLOYEE STOCK OWNERSHIP PLAN The Company has an employee stock ownership plan (ESOP) which has invested in the Company's common stock for the benefit of eligible employees. The Company makes annual contributions to the plan as determined by the Board of Directors, limited to 25% of eligible employee compensation, plus principal and interest paid on the related debt. PackerWare Corporation Notes to Balance Sheet (continued) 6. EMPLOYEE STOCK OWNERSHIP PLAN (CONTINUED) Through an employee stock ownership trust (ESOT), which was established to fund the ESOP, 250,000 shares of common stock were acquired for $10,000,000 using the proceeds of a bank loan the ESOT. The Company has guaranteed the repayment of the loan to the ESOT. Under this guarantee, the Company is obligated to make contributions to the ESOT to enable it to make similar payments against the bank loan. The loan matures on January 31, 1997 and accrues interest at the bank's base rate (8.25% on January 21, 1997) and is collateralized by a security agreement which specifies the stock purchased by the ESOP. The Company accounts for the plan in accordance with Statement of Position (SOP) 93-6, EMPLOYERS' ACCOUNTING FOR EMPLOYEE STOCK OWNERSHIP PLANS. In accordance with this statement, unearned shares are recorded as a contra-equity account and are valued at their original cost. Compensation expense is charged based on the fair value of shares when they are released. Any differences between the historical cost and fair value of released shares is recorded as an increase or decrease to additional paid-in capital. The ESOP shares at January 21, 1997 are as follows:
Shares released for allocation $ 115,752 Unreleased shares 94,977 ---------- Total ESOP shares $ 210,729 ========== Estimated fair value of unreleased shares based on most recent valuation, November 18, 1996 $ 988,711 ==========
7. STOCK OPTION PLAN The Company has a stock option plan which permits the issuance of options to selected employees and independent contractors of the Company. The maximum aggregate number of options which may be outstanding at any point in time under the plan is 50,000. Under the terms of the plan, options granted may be either nonqualified or incentive stock options and the exercise price may not be less than the fair market value of a share of common stock on the date of grant. Options granted under the plan are exercisable in installments not to exceed ten years from the date of grant. PackerWare Corporation Notes to Balance Sheet (continued) 7. STOCK OPTION PLAN (CONTINUED) At January 21, 1997, there were 5,000 options outstanding at an exercise price of $14. 2,000 of these shares are currently exercisable at the discretion of the option holder. 8. ACQUISITION OF THE COMPANY On January 21, 1997, the Company and its shareholders executed an Agreement and Plan of Reorganization (the "Agreement") with Berry Plastics Corporation and PackerWare Acquisition Corporation (collectively "Berry") whereby Berry purchased the outstanding common stock of the Company for a purchase price of approximately $26.5 million. PackerWare Corporation Statement of Operations (Unaudited) Period from November 1, 1996 to January 21, 1997 (Dollars in thousands)
Net sales $ 5,215 Cost of goods sold 5,897 Gross margin (deficit) (682) ---------- Operating expenses: Selling 374 General and administrative 702 ---------- Total operating expenses 1,076 ---------- Loss from operations (1,758) Other expense: Interest, net 409 Other 60 ---------- 469 ---------- Loss before income taxes (2,227) Income tax benefit 564 ---------- Net loss $ (1,663) ==========
SEE ACCOMPANYING NOTE. PackerWare Corporation Statement of Cash Flows (Unaudited) Period from November 1, 1996 to January 21, 1997 (Dollars in thousands)
OPERATING ACTIVITIES Net loss $ (1,663) Adjustments to reconcile net loss to net cash provided by operating activities Depreciation and amortization 1,121 Deferred income taxes (564) Changes in operating assets and liabilities Accounts receivable, net 1,552 Inventories, net (2,241) Cash value of life insurance and other assets (41) Accounts payable and accrued expenses 1,664 ---------- Net cash used for operating activities (172) INVESTING ACTIVITIES Additions to property and equipment (445) ---------- Net cash used for investing activities (445) FINANCING ACTIVITIES Borrowings on line of credit, net 850 Payments of long-term debt (122) ---------- Net cash provided by financing activities 728 ---------- Net increase in cash and cash equivalents 111 Cash and equivalents at beginning of year 22 ---------- Cash and equivalents at end of year $ 133 ==========
SEE ACCOMPANYING NOTE. PackerWare Corporation Note to Statements of Operations and Cash Flows The unaudited statements of operations and cash flows of PackerWare Corporation for the period from November 1, 1996 to January 21, 1997 have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the period presented are not necessarily indicative of the results that may be expected for the full fiscal year. These statements should be read in conjunction with the annual financial statements and related note of PackerWare for the year ended October 31, 1996 included in this Form 8-K/A. Comparative statements of operations and cash flows for the period from November 1, 1995 to January 21, 1996 have not been presented as these statements were not available. BPC HOLDING CORPORATION PRO FORMA UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) The following unaudited pro forma condensed consolidated statement of operations and condensed consolidated balance sheet (collectively, the "Pro Forma Statements") give effect to the purchase of the outstanding common stock of PackerWare Corporation ("PackerWare") by Berry Plastics Corporation ("Berry"). Berry is a wholly owned subsidiary of BPC Holding Corporation ("Holding"). The pro forma information is based on the historical consolidated financial statements of Holding and historical financial statements of PackerWare, giving effect to the PackerWare acquisition using the purchase method of accounting and the assumptions and adjustments in the accompanying notes to the pro forma condensed consolidated financial statements. The pro forma statement of operations gives effect to the acquisition as if it had occurred on December 31, 1995 and the pro forma condensed balance sheet gives effect to the acquisition as if it had occurred on December 28, 1996. The Pro Forma Statements do not purport to represent what Holding's consolidated financial position or results of operations would actually have been if such transaction had in fact occurred on such dates or to project Holding's consolidated financial position or results of operations for any future date or period. The pro forma adjustments are based upon available information and upon assumptions that Holding believes to be reasonable. The Pro Forma Statements and accompanying notes should be read in conjunction with the historical consolidated financial statements and related notes of Holding included within its Annual Report on Form 10-K for the year ended December 28, 1996, and with the financial statements and related notes of PackerWare for the year ended October 31, 1996 and the unaudited financial statements and related notes of PackerWare for the period from November 1, 1996 to January 21, 1997 included in this Form 8-K/A. BPC HOLDING CORPORATION PRO FORMA UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET (DOLLARS IN THOUSANDS)
DECEMBER 28, 1996 --------------------------------------------------------------------------- HOLDING PACKERWARE PRO FORMA CONSOLIDATED HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA ---------- ---------- ----------- ----------- ASSETS Current assets Cash and cash equivalents $10,192 $22 $- $10,214 Accounts receivable 17,642 4,542 - 22,184 Inventories 13,607 7,537 - 21,144 Other current assets 1,393 786 (52) (a) 2,127 ------- -------- ------- ------- Total current assets 42,834 12,887 (52) 55,669 Assets held in trust 30,188 - - 30,188 Property and equipment 55,664 14,625 2,625 (b) 72,914 Intangible assets 14,752 - 6,431 (b) 21,183 Other assets 2,360 377 (336) (a) 2,401 ------- -------- ------- ------- Total assets $145,798 $27,889 $8,668 $182,355 ======= ======== ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $12,877 $3,614 $- $16,491 Accrued expenses 10,023 2,022 - 12,045 Accrued interest 3,286 35 (35) (a) 3,286 Current portion of long-term debt 738 7,837 (7,837) (c) 738 ------- -------- ------- ------- Total current liabilities 26,924 13,508 (7,872) 32,560 Long-term debt: Holding 12.50% Senior Secured Notes 105,000 - - 105,000 Berry 12.25% Senior Subordinated Notes 100,000 - - 100,000 Industrial Revenue Bonds 10,400 - - 10,400 Capital lease obligation 547 - - 547 Debt discount (639) - - (639) PackerWare Employee Stock Ownership Plan obligation - 6,480 (6,480) (c) - Berry revolving and senior credit facilities - - 29,319 (d) 29,319 ------- -------- ------- ------- Total long-term debt 215,308 6,480 22,839 244,627 Other liabilities 1,116 604 998 2,718 ------- -------- ------- ------- Total liabilities 243,348 20,592 15,965 279,905 Stockholders' equity (deficit): Common stock and additional paid-in 51,687 5,556 (5,556) (e) 51,687 capital Preferred stock 11,216 - - 11,216 Treasury stock (22) (1,697) 1,697 (e) (22) Warrants 3,511 - - 3,511 Retained earnings (deficit) (163,942) 7,238 (7,238) (e) (163,942) Unearned Employee Stock Ownership shares - (3,800) 3,800 (e) - ------- -------- ------- ------- Total stockholders' equity (deficit) (97,550) 7,297 (7,297) (97,550) ------- -------- ------- ------- Total liabilities and stockholders' equity (deficit) $145,798 $27,889 $8,668 $182,355 ======= ======= ======= =======
SEE FOOTNOTES ON FOLLOWING PAGE. BPC HOLDING CORPORATION NOTES TO PRO FORMA UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET (DOLLARS IN THOUSANDS)
The historical balance sheet presented for Holding is as of December 28, 1996, and the historical balance sheet presented for PackerWare is as of October 31, 1996. The following adjustments reflect the acquisition of the common stock of PackerWare, the effect of the consolidation of PackerWare's Nevada operations, and the repayment of the outstanding debt of PackerWare on a pro forma basis using proceeds from Berry's revolving credit facility. The pro forma allocations to the assets acquired and liabilities assumed have been made using estimates by management and may be adjusted to reflect fair values subsequently established as a result of appraisals by a qualified appraiser. The amount allocated to cost in excess of assets acquired may be subsequently adjusted to reflect such appraisals, but any such adjustment is not expected to be material. The cost in excess of net assets acquired will be amortized by the straight-line method over a period of 15 years. (a) Adjustments for assets of PackerWare not purchased and liabilities not assumed: Accounts receivable from employees $3 Current portion of bond origination fees 49 ------ Total other current assets 52 Cash value of life insurance 301 Long-term portion of bond origination fees 35 ------ Total other assets 336 Accrued interest (35) ------ $353 ====== (b) Adjustments for assumed fair values of assets and liabilities of PackerWare: Increase of property and equipment to estimated fair value $2,625 Allocation of excess of purchase price over net assets acquired to intangible assets 6,431 Deferred income taxes on the step-up to estimated fair value of property and equipment (998) ------ $8,058 ====== (c) Repayment of PackerWare debt: Current portion of long-term debt $7,837 Employee Stock Ownership Plan obligation 6,480 ------ $14,317 ====== (d) Borrowings for payment of purchase price and transaction costs: Proceeds from Berry revolving and senior credit facilities $29,319 ------ (e) Elimination of PackerWare's stockholders' equity: Common stock and additional paid-in capital $5,556 Treasury stock (1,697) Retained earnings 7,238 Unearned Employee Stock Ownership shares (3,800) ------ $7,297 ======
BPC HOLDING CORPORATION PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (DOLLARS IN THOUSANDS)
FISCAL 1996 HOLDING PACKERWARE PRO FORMA CONSOLIDATED HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA Net sales $151,058 $42,818 ($1,007) (a) $192,869 Cost of goods sold 110,110 36,521 (d) (1,564) (a) 144,494 (573) (b) --------- ------- ------- -------- Gross margin 40,948 6,297 1,130 48,375 Operating expenses 23,679 4,773 (d) (166) (a) 28,482 196 (b) --------- ------- ------- -------- Income from operations 17,269 1,524 1,100 19,893 Interest expense, net (20,075) (1,469) (866) (b) (22,410) Other income (expense) (302) 426 - 124 --------- ------- ------- -------- Income before income taxes (3,108) 481 234 (2,393) Income tax expense 239 243 (243) (c) 239 --------- ------- ------- -------- Net income (loss) (3,347) 238 477 (2,632) Preferred stock dividends (1,116) - - (1,116) --------- ------- ------- -------- Net income (loss) attributable to common shareholders ($4,463) $238 $477 ($3,748) ========= ======= ======= ========
SEE FOOTNOTES ON FOLLOWING PAGE. BPC HOLDING CORPORATION NOTES TO PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (DOLLARS IN THOUSANDS)
The historical consolidated statement of operations presented for Holding is for its fiscal year ended December 28, 1996 and the historical statement of operations presented for PackerWare is for its fiscal year ended October 31, 1996. (a) Adjustments of net sales, cost of goods sold and operating expenses due to shut down of PackerWare's Nevada operations: NET SALES: Elimination of total net sales of PackerWare's Nevada operations ($4,707) Addition of net sales retained due to transfer to other PackerWare location or to existing Holding location 3,700 ------ Net reduction in net sales ($1,007) ====== COST OF GOODS SOLD: Elimination of total cost of goods sold of PackerWare's Nevada operations ($4,672) Addition of cost of sales related to net sales retained 3,108 ------ Net reduction in cost of goods sold ($1,564) ====== OPERATING EXPENSE: Elimination of expenses incurred by PackerWare related to the sale of the company ($166) ====== (b)Other adjustments to cost of goods sold, operating expenses and interest expense are comprised of the following: COST OF GOODS SOLD: Decrease in resin costs due to volume discounts available to Berry ($1,000) Net increase in depreciation expense due to a change in the remaining useful lives of the related assets 427 ------ Net reduction in cost of goods sold ($573) ====== OPERATING EXPENSES: Elimination of former employee salaries ($241) Increase in amortization of cost in excess of net assets acquired 437 ------ Net increase in operating expenses` $196 ======
BPC HOLDING CORPORATION NOTES TO PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (DOLLARS IN THOUSANDS)
INTEREST EXPENSE: Elimination of interest expense on debt extinguished ($1,485) Additional interest incurred on borrowing for the PackerWare acquisition 2,351 ------ Net change in interest expense $866 ====== (c) Adjustments to income tax expense: Elimination of PackerWare income tax expenses due to a decrease in Holding's net operating loss offset by a corresponding decrease in the valuation allowance on deferred tax assets ($243) ====== (d) Cost of goods sold and operating expenses include a total of $3,342 of depreciation and amortization expense
UNAUDITED PRO FORMA FINANCIAL INFORMATION OF BERRY PLASTICS CORPORATION (DOLLARS IN THOUSANDS) The following summarizes pro forma unaudited financial information of Holding's wholly owned subsidiary, Berry. The pro forma information is based on the historical consolidated financial statements of Berry and historical financial statements of PackerWare, giving effect to the PackerWare acquisition using the purchase method of accounting and the assumptions and adjustments in the accompanying notes to the pro forma condensed consolidated financial statements. The pro forma statement of operations gives effect to the acquisition as if it had occurred on December 31, 1995 and the pro forma condensed balance sheet gives effect to the acquisition as if it had occurred on December 28, 1996.
CONSOLIDATED PRO FORMA BALANCE SHEET Current assets $ 55,280 Property and equipment, net of accumulated depreciation 71,789 Other noncurrent assets 18,645 Current liabilities 31,856 Noncurrent liabilities 143,035
CONSOLIDATED STATEMENT OF OPERATIONS Net sales $ 189,169 Cost of goods sold 142,386 Income before income taxes 5,687 Net income 5,250
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