-----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, JReXYN1UcxjnLi61BP9oxNsnpZlnUraAdAKcOjqGC/H9B2Bq95BWnl0irDQ7pLWY /YdwOClg8lfLvwZhF3Z6ag== 0000919463-97-000009.txt : 19970813 0000919463-97-000009.hdr.sgml : 19970813 ACCESSION NUMBER: 0000919463-97-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970628 FILED AS OF DATE: 19970812 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: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-75706 FILM NUMBER: 97657382 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 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 28, 1997 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from___________________to__________________ Commission File Number 33-75706, 33-75706-01; 33-75706-02, 33-75706-03 BERRY PLASTICS CORPORATION BPC HOLDING CORPORATION BERRY IOWA CORPORATION BERRY TRI-PLAS CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 35-1814673 (State or other jurisdiction of incorporation or organization) (IRS employer identification no.) 101 OAKLEY STREET, EVANSVILLE, INDIANA 47710 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (812) 424-2904 NONE (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Number of Shares Outstanding COMMON STOCK AS OF AUGUST 1, 1997 Class A - Voting - $.01 Par Value 91,000 Class A - Nonvoting - $.01 Par Value 259,000 Class B - Voting - $.01 Par Value 145,001 Class B - Nonvoting - $.01 Par Value 57,618 Class C - Nonvoting - $.01 Par Value 16,981 BPC HOLDING CORPORATION AND SUBSIDIARIES FORM 10-Q INDEX FOR QUARTERLY PERIOD ENDED JUNE 28, 1997 PAGE NO. Part I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets 3 Consolidated Statements of Operations 5 Consolidated Statement of Changes in Stockholders' Equity (Deficit) 6 Consolidated Statements of Cash Flows 7 Notes to Consolidated Financial Statements 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 PART II. OTHER INFORMATION Item 2 (a). Changes in Securities 16 Item 4. Submission of Matters to a Vote of Security Holders 16 Item 6. Exhibits and Reports on Form 8-K 16 SIGNATURE 17 PART 1. FINANCIAL INFORMATION Item 1. Financial Statements BPC Holding Corporation and Subsidiaries Consolidated Balance Sheets (In Thousands of Dollars)
JUNE 28, 1997 DECEMBER 28, 1996 ------------- ----------------- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents $ 1,501 $ 10,192 Accounts receivable (less allowance for doubtful accounts of $845 and $618) 30,870 17,642 Inventories: Finished goods 15,289 9,100 Raw materials and supplies 4,779 3,945 Custom molds 1,414 562 ---------- -------- 21,482 13,607 Prepaid expenses and other receivables 1,518 957 Income taxes recoverable 36 436 ---------- -------- Total current assets 55,407 42,834 Assets held in trust 24,729 30,188 Property and equipment: Land 5,156 4,598 Buildings and improvements 25,590 18,290 Machinery, equipment and tooling 102,791 79,043 Automobiles and trucks 1,120 639 Construction in progress 4,394 3,476 ---------- -------- 139,051 106,046 Less accumulated depreciation 57,199 50,382 ---------- -------- 81,852 55,664 Intangible assets: Excess of cost over net assets acquired 13,049 4,273 Deferred financing and origination fees 10,747 9,912 Covenants not to compete 430 40 Deferred acquisition costs 59 527 ---------- -------- 24,285 14,752 Deferred income taxes 1,625 2,003 Other 475 357 ---------- -------- Total assets $188,373 $145,798 ========== ========
BPC Holding Corporation and Subsidiaries Consolidated Balance Sheets (continued) (In Thousands of Dollars)
JUNE 28, 1997 DECEMBER 28, 1996 ------------- ----------------- (UNAUDITED) LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable $ 16,229 $ 12,877 Accrued expenses and other liabilities 8,204 4,676 Accrued interest 3,336 3,286 Employee compensation and payroll taxes 5,853 5,230 Income taxes 102 117 Current portion of long-term debt 5,120 738 ---------- -------- Total current liabilities 38,844 26,924 Long-term debt, less current portion 250,411 215,308 Accrued dividends on preferred stock 2,163 1,116 ---------- -------- 291,418 243,348 Stockholders' equity (deficit): Preferred stock; 1,000,000 shares authorized; 600,000 shares issued and outstanding (net of discount of $3,210 and $3,355) 11,362 11,216 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; 145,001 shares issued and outstanding 1 1 Nonvoting; 500,000 shares authorized; 54,779 shares issued and outstanding 1 1 Class C Common Stock; $.01 par value: Nonvoting; 500,000 shares authorized; 16,981 shares issued and outstanding - - Treasury stock: 239 shares (22) (22) Additional paid-in capital 50,633 51,681 Warrants 3,511 3,511 Retained earnings (deficit) (168,535) (163,942) ---------- -------- Total stockholders' equity (deficit) (103,045) (97,550) ---------- -------- Total liabilities and stockholders' equity (deficit) $ 188,373 $ 145,798 ========== ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. BPC Holding Corporation and Subsidiaries Consolidated Statements of Operations (In Thousands of Dollars, Except Per Share Data)
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED -------------------------------- ------------------------------- JUNE 28 JUNE 29 JUNE 28 JUNE 29 1997 1996 1997 1996 -------------------------------- ------------------------------- (UNAUDITED) (UNAUDITED) Net sales $56,929 $38,876 $105,936 $73,872 Cost of goods sold 43,771 27,352 82,167 52,471 -------- -------- --------- -------- Gross margin 13,158 11,524 23,769 21,401 Operating expenses: Selling 2,737 1,738 5,094 3,409 General and administrative 3,120 5,980 5,725 9,165 Research and development 366 185 602 393 Amortization of intangibles 346 105 624 205 Other 910 175 1,741 51 -------- -------- --------- -------- Operating income 5,679 3,341 9,983 7,717 Other income and expense: Loss (gain) on disposal of property and equipment 90 19 90 (23) -------- -------- --------- -------- Income before interest and income 5,589 3,322 9,893 7,740 taxes Interest: Expense (7,742) (4,032) (15,550) (7,479) Income 709 100 1,156 167 -------- -------- --------- -------- Income (loss) before income taxes (1,444) (610) (4,501) 428 Income tax expense (benefit) 564 (188) 92 209 -------- -------- --------- -------- Net income (loss) (2,008) (422) (4,593) 219 Preferred stock dividends (524) - (1,048) - -------- -------- --------- -------- Net income (loss) attributable to common shareholders $ (2,532) $ (422) $ (5,641) $ 219 ======== ======== ========= ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. BPC Holding Corporation and Subsidiaries Consolidated Statement of Changes in Stockholders' Equity (Deficit) (In Thousands of Dollars) (Unaudited)
ADDITIONAL RETAINED COMMON STOCK ISSUED PREFERRED TREASURY PAID-IN EARNINGS CLASS A CLASS B CLASS C STOCK STOCK CAPITAL WARRANTS (DEFICIT) TOTAL ------- ------- ------- ------- ------- ------- -------- -------- -------- Balance at December 28, 1996 $ 4 $ 2 $ - $11,216 $ (22) $51,681 $ 3,511 $(163,942) $(97,550) Net loss - - - - - - - (4,593) (4,593) Accrued dividends on preferred - - - - - (1,408) - - (1,408) stock Amortization of preferred stock - - - 146 - - - - 146 discount ------- ------- ------- ------- ------- ------- -------- -------- -------- Balance at June 28, 1997 $ 4 $ 2 $ - $11,362 $ (22) $50,633 $ 3,511 $(168,535) $(103,045) ======= ======= ======= ======= ======= ======= ======= ========= ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. BPC HOLDING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of Dollars)
TWENTY-SIX WEEKS ENDED --------------------------------------------- JUNE 28, 1997 JUNE 29, 1997 -------------------- --------------------- (UNAUDITED) OPERATING ACTIVITIES Net income(loss) $ (4,593) $ 219 Adjustments to reconcile net income (loss) to net cash provided by(used for) operating activities: Depreciation and amortization 7,873 5,302 Non-cash interest expense 739 481 Write off of financing fees 390 - Non-cash compensation - 358 Gain on sale of property and equipment 90 (23) Deferred income taxes (20) 172 Changes in operating assets and liabilities: Accounts receivable, net (8,833) (3,824) Inventories 2,492 (3,304) Prepaid expenses and other receivables (96) 219 Accounts payable and accrued expenses (3,938) 1,309 Other assets 164 (6) ---------- -------- Net cash provided by (used for) operating activities (5,732) 903 INVESTING ACTIVITIES Additions to property and equipment (4,801) (5,890) Proceeds from disposal of property and equipment 1,060 43 Purchase of PackerWare Corporation (28,190) - Purchase of assets of Container Industries, Inc. (2,878) - Purchase of assets of Virginia Design Packaging Corp. (11,129) Purchase of the Alpha drink cup product line - (776) ---------- -------- Net cash used for investing activities (45,938) (6,623) FINANCING ACTIVITIES Proceeds from term loan borrowings 31,980 49 Proceeds from borrowings on revolving line of credit 8,827 - Payments on long-term borrowings (1,250) (500) Payment of refinancing fees (1,184) - Payment of bond consent fee (737) - Payment on capital lease (116) (106) Exercise of management stock options - 1,130 Proceeds from senior secured notes - 105,000 Proceeds from issuance of common stock - 52,797 Proceeds from issuance of preferred stock and warrants - 14,572 Rollover investments and share repurchases - (125,219) Assets held in trust - (35,600) Net payments to public warrant holders - (4,502) Debt issuance costs - (5,369) Interest applied to assets held in trust 5,459 (65) ---------- -------- Net cash provided by financing activities 42,979 2,187 ---------- -------- Net decrease in cash and cash equivalents (8,691) (3,533) Cash and cash equivalents at beginning of period 10,192 8,035 ---------- -------- Cash and cash equivalents at end of period $ 1,501 $ 4,502 ========== ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. BPC Holding Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of BPC Holding Corporation and its subsidiaries (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full fiscal year. The accompanying financial statements include the results of BPC Holding Corporation ("Holding") and its wholly- owned subsidiary, Berry Plastics Corporation ("Berry"), and its wholly-owned subsidiaries: PackerWare Corporation, Berry Iowa Corporation; Berry Tri-Plas Corporation; Berry Sterling Corporation, Berry Plastics Design Corporation, and AeroCon, Inc. For further information, refer to the consolidated financial statements and footnotes thereto included in Holding's and Berry's Form 10-K's filed with the Securities and Exchange Commission for the year ended December 28, 1996 and information included in Holding's Form S-4 filed with the Securities and Exchange Commission on August 28, 1996. 2. COMPANY RECAPITALIZATION On June 18, 1996, BPC Mergerco, Inc. ("Mergerco"), a company organized by Atlantic Equity Partners International II, L.P., Chase Venture Capital Associates, L.P., certain other institutional investors and management, effected the acquisition of a majority of the outstanding capital stock of Holding by way of merger with Holding, with Holding being the surviving corporation (the "Transaction"). Sources of funds for the new capital structure included the issuance of $55.0 million of common stock, $15.0 million of preferred stock and warrants to purchase common shares of Holding, $105.0 million of 12.5% Senior Secured Notes (the "Notes") described below, and exercise of management stock options of approximately $0.9 million. Approximately $125.2 million of the proceeds were used for rollover investments and purchase of equity interests, and the remaining proceeds were used to make payments of approximately $4.5 million to public warrant holders, to establish an escrow account of $35.6 million to pay the first three years' interest on the Notes, to make deferred payments to certain holders of stock options of approximately $2.5 million, to pay fees and expenses related to the transaction of approximately $7.7 million, and $0.4 million was held in cash. In connection with the Transaction, Holding retired its old Class A and Class B common stock and authorized the creation of 500,000 shares each of new Class A voting and non-voting common stock, 500,000 shares each of new Class B voting and non-voting common stock, and 500,000 shares of new Class C non-voting common stock. 3. ISSUANCE OF SENIOR SECURED NOTES In connection with the Transaction mentioned above, Holding completed a 144A private placement of $105.0 million of Senior Secured Notes due 2006 (the "Old Notes"). On October 9, 1996, Holding consummated an exchange offer whereby the Old Notes were exchanged for 12.5% Series B Senior Secured Notes due 2006 (the "Notes"). The terms of the Notes are identical in all material respects to the Old Notes, except that the Notes have been registered under the Securities Act of 1933, as amended, and therefore do not bear legends restricting their transfer and do not contain certain provisions providing for the payment of liquidated damages to the holders of the Old Notes under certain circumstances relating to the registration of the Old Notes, which provisions terminated upon the consummation of the exchange of the Old Notes for the Notes. The Notes bear interest at 12.5% and mature on June 15, 2006. These Notes are senior secured obligations of Holding and are secured by a first priority pledge of all shares of outstanding capital stock of Berry. Except as provided below, interest on the Notes is payable in cash semi-annually in arrears on June 15 and December 15 of each year. Proceeds of the Old Notes (net of fees and expenses of approximately $5.4 million) were used to finance $64.0 million of the purchase of equity interests and establish an escrow of $35.6 million to pay the first three years' interest on the Notes. In addition, from December 15, 1999 until June 15, 2001, the Company may, at its option, pay interest, at an increased rate of .75% per annum, in the form of additional Notes valued at 100% of the principal amount thereof. 4. ACQUISITIONS On January 17, 1997, Berry acquired substantially all of the assets of Container Industries, Inc. ("Container Industries") of Pacoima, California for $2.9 million. The purchase was funded out of operating funds. The operations of Container Industries are included in Berry's operations from the acquisition date using the purchase method of accounting. On January 21, 1997, Berry acquired PackerWare Corporation ("PackerWare"), a Kansas corporation, for aggregate consideration of approximately $28.2 million and merged PackerWare with and into a newly-formed, wholly-owned subsidiary of Berry. The purchase was primarily financed through the New Credit Facility (see Note 5). The operations of PackerWare are included in Berry's operations from the acquisition date using the purchase method of accounting. On May 13, 1997, Berry Plastics Design Corporation, a newly-formed wholly- owned subsidiary of Berry, acquired substantially all of the assets of Virginia Design Packaging Corp. ("Virginia Design") for approximately $11.1 million. The purchase was financed through the New Credit Facility. The operations of Berry Plastics Design Corporation are included in Berry's operations from the acquisition date using the purchase method of accounting. The pro forma results listed below are unaudited and reflect purchase accounting adjustments assuming the Container Industries, PackerWare and Virginia Design acquisitions occurred on December 31, 1995.
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED JUNE 29, 1996 JUNE 29, 1996 (In thousands) Net sales $ 52,409 $ 99,065 Loss before income taxes (1,494) (1,091) Net loss (1,494) (882)
The pro forma financial information is presented for informational purposes only and is not necessarily indicative of the operating results that would have occurred had the acquisitions been consummated at the above date, nor are they necessarily indicative of future operating results. Further, the information gathered on the acquired companies is based upon unaudited internal financial information and reflects only pro forma adjustments for additional interest expense and amortization of the excess of the cost over the underlying net assets acquired, net of the applicable income tax effect. 1. REFINANCING OF REVOLVING CREDIT FACILITY Concurrent with the acquisition of PackerWare (see Note 4), Berry entered into a financing and security agreement with NationsBank, N.A. for a senior secured line of credit in an aggregate principal amount of $60.0 million (the "New Credit Facility"). As a result of the acquisition of assets of Virginia Design, the New Credit Facility was increased to $74.0 million. The indebtedness under the New Credit Facility is guaranteed by Holding and Berry's subsidiaries. The New Credit Facility replaced the facility previously provided by Fleet Capital Corporation. The New Credit Facility, including the financing for Virginia Design, provides Berry with a $30.0 million revolving line of credit, subject to a borrowing base formula, a $32.0 million term loan facility and a $12.0 million standby letter of credit to support Berry's and its subsidiaries' obligations under the Nevada and Iowa Industrial Revenue Bonds. Berry borrowed all $32.0 million of the term loan facility to finance the PackerWare and Virginia Design acquisitions. The New Credit Facility matures January 21, 2002 unless previously terminated by Berry or by the lenders upon an Event of Default as defined in the New Credit Facility. Interest on borrowings on the New Credit Facility will be based on the lender's base rate plus 1.0% or LIBOR plus 2.0%, at Berry's option. 2. LONG-TERM DEBT Long-term debt consists of the following:
JUNE 28, DECEMBER 28, 1997 1996 ------------- --------------- (In thousands) Holding 12.50% Senior Secured Notes $105,000 $105,000 Berry 12.25% Senior Subordinated Notes 100,000 100,000 Term loan 31,230 - Revolving line of credit 8,827 - Nevada Industrial Revenue Bonds 5,000 5,500 Iowa Industrial Revenue Bonds 5,400 5,400 Capital lease obligation 669 785 Debt discount (595) (639) --------- ---------- 255,531 216,046 Less current portion of long-term debt 5,120 738 --------- ---------- $250,411 $215,308 ========= ==========
The current portion of long-term debt is limited to $4.4 million of quarterly installments to the term loan, a $0.5 million repayment of the industrial revenue bonds and the monthly principal payments related to a capital lease obligation. Berry also maintains the $30.0 million revolving line of credit with NationsBank, N.A. (see Note 5). Based on the borrowing formula as of June 28, 1997, Berry had approximately $20.5 million of additional available credit under the NationsBank, N.A. credit line. 7. PATENT INFRINGEMENT LITIGATION On April 25, 1996, in connection with the patent infringement lawsuit filed by Berry Sterling Corporation against Pescor Plastics, Inc., the United States District Court for the Eastern District of Virginia entered an order that held that Berry Sterling's patent for the design of a drink cup was not valid. Berry Sterling is currently appealing this ruling. 8. BERRY PLASTICS CORPORATION SUMMARY FINANCIAL INFORMATION The following summarizes financial information of Holding's wholly-owned subsidiary, Berry Plastics Corporation, and its subsidiaries.
JUNE 28, 1997 December 28, 1996 -------------- ----------------- (In thousands) BALANCE SHEETS Current assets $ 55,029 $ 42,445 Property and equipment - net of accumulated depreciation 81,852 55,664 Other noncurrent assets 21,558 12,046 ----------- ----------- Total assets $ 158,439 $ 110,155 =========== =========== Current liabilities $ 40,890 $ 26,220 Noncurrent liabilities 145,410 113,112 Stockholders' equity (deficit) (27,861) (29,177) ----------- ----------- Total liabilities and stockholders' equity (deficit) $ 158,439 $ 110,155 =========== ===========
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED -------------------------------- -------------------------------- JUNE 28, 1997 JUNE 29, 1996 JUNE 28, 1997 JUNE 29, 1996 -------------- -------------- --------------- -------------- (In thousands) (In thousands) STATEMENTS OF OPERATIONS Net sales $ 56,929 $ 38,876 $ 105,935 $ 72,873 Cost of goods sold 43,771 27,352 82,167 52,471 Operating income 5,752 6,661 10,129 11,376 Income before income taxes 1,380 2,922 1,413 3,963
Item 2. BPC Holding Corporation and Subsidiaries Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion includes certain forward-looking statements. Actual results could differ materially from those reflected by the forward- looking statements in the discussion, and a number of factors could adversely affect future results, liquidity and capital resources. These factors include, among other things, the Company's ability to pass through raw material price increases to its customers, its ability to service debt, the availability of plastic resin, the impact of changing environmental laws and changes in the level of the Company's capital investment. Although management believes it has the business strategy and resources needed for improved operations, future revenue and margin trends cannot be reliably predicted. RESULTS OF OPERATIONS 13 WEEKS ENDED JUNE 28, 1997 (THE "QUARTER") COMPARED TO 13 WEEKS ENDED JUNE 29, 1996 (THE "PRIOR QUARTER") NET SALES. Net sales increased $18.0 million, or 46%, to $56.9 million for the Quarter from $38.9 million for the Prior Quarter, including an approximate 3.0% increase in net selling price due mainly to the impact of cyclical adjustments in the price of plastic resin. The increase in net sales was attributed to a combination of the addition of PackerWare and Virginia Design net sales of an aggregate of $13.7 million, higher overcap sales of $0.3 million, higher drink cup sales of $2.0 million (excluding PackerWare) and higher container sales of $2.2 million. Sales of custom products were flat with the prior year. GROSS MARGIN. Gross margin increased by $1.7 million to $13.2 million for the Quarter from $11.5 million for the Prior Quarter. This increase of 15% included the combined impact of both the PackerWare and Virginia Design sales volume. Gross margin as a percent of sales decreased to 23.2% of net sales for the Quarter from 29.6% of net sales in the prior Quarter due to the addition of lower margin business from PackerWare and Virginia Design, the cyclical impact of higher raw material costs compared to the Prior Quarter, and suppressed market selling prices in both the container and drink cup product lines. OPERATING EXPENSES. Selling expenses increased by $1.0 million to $2.7 million for the Quarter from $1.7 million for the Prior Quarter principally as a result of expanded sales coverage, the acquisition of PackerWare and the assets of Virginia Design, and increased product development and marketing expenses. General and administrative expenses decreased by $2.9 million to $3.1 million for the Quarter from $6.0 million for the Prior Quarter, mainly because of $2.5 million of deferred payments to certain holders of stock options (SEE NOTE 2) were made in the Prior Quarter, and also because of a reduction of expenses due to the consolidation of the Winchester plant in late 1996, and a reduction of patent litigation expenses. During the Quarter, one- time transition expenses for the PackerWare, Container Industries and Virginia Design transactions were $0.9 million. In the Prior Quarter, the transition relating to the acquisition of assets of Tri-Plas resulted in an expense of $0.2 million. INTEREST EXPENSE. Interest expense increased $3.7 million to $7.7 million for the Quarter compared to $4.0 million for the Prior Quarter due to the issuance of Senior Secured Notes in June 1996 (SEE NOTE 3) and the New Credit Facility (SEE NOTE 5). INCOME TAX. For the Quarter, the Company recordedincome tax expense of $0.6 million compared to an income tax benefit of $0.2 million for the Prior Quarter. The expense for the Quarter of $0.6 million resulted from a change in the year-to-date estimated effective income tax rate. Primary reconciling items between taxes computed at the Federal statutory rate and taxes computed for book purposes include state income taxes and amortization of goodwill not deductible for tax purposes. NET INCOME (LOSS) AND EBITDA. Net loss for the Quarter of $2.0 million increased $1.6 million from net loss of $0.4 million for the Prior Quarter for the reasons discussed above. EBITDA, defined as income before taxes, interest, depreciation, amortization, loss (gain) on disposal of property and equipment, write-off of deferred acquisition costs, write-off of financing fees, one-time transition expenses related to acquisitions by the Company, and the shutdown of the Winchester, Virginia facility, was $10.7 million for the Quarter compared to $6.2 million for the Prior Quarter. 26 Weeks Ended June 28, 1997 ("YTD") Compared to 26 Weeks Ended June 29, 1996 ("prior YTD") NET SALES. Net sales increased $32.0 million, or 43%, to $105.9 million YTD from $73.9 million for the prior YTD, notwithstanding an approximate 3% increase in net selling price due mainly to the impact of cyclical adjustments in the price of plastic. Other increases in net sales were attributed to a combination of the addition of PackerWare and Virginia Design net sales of an aggregate of $25.0 million, higher aerosol overcap sales of $1.5 million, higher drink cup sales of $2.8 million (excluding PackerWare drink cup net sales), higher container sales of $2.5 million, and higher custom molded products of $0.3 million. GROSS MARGIN. Gross margin increased by $2.4 million to $23.8 million YTD from $21.4 million for the prior YTD. This increase in gross margin included $4.1 million from the PackerWare acquisition offset by a decrease of $1.7 million resulting from the cyclical impact of higher raw material costs compared to the prior YTD and suppressed market prices in both the container and drink cup product lines. Additionally, the Evansville plant incurred additional plant overhead costs in the first quarter of 1997 associated with supporting expanded injection molding capacity and capabilities. OPERATING EXPENSES. Selling expenses increased by $1.7 million to $5.1 million YTD from $3.4 million for the prior YTD principally as a result of expanded sales coverage, the acquisition of PackerWare and the assets of Virginia Design, and increased product development and marketing expenses. General and administrative expenses decreased by $3.5 million to $5.7 million YTD from $9.2 million for the prior YTD. The decrease was primarily due to prior year expenses relating to the Transaction of $3.1 million, including $2.5 million of deferred payments to certain holders of stock options (SEE NOTE 2), and a decrease in patent and other litigation expenses of $0.5 million. Other YTD expense of $1.7 million included $0.3 million of cost associated with the shutdown of the Winchester, Virginia facility, $0.9 million associated with the transition of the PackerWare business, and $0.5 million resulting from the transition of both the Container Industries and Virginia Design acquisitions. Prior YTD other expenses of $0.5 million included transition costs associated with the Tri-Plas and Sterling acquisitions. INTEREST EXPENSE. Interest expense increased $8.1 million to $15.6 million YTD compared to $7.5 million for the prior YTD due to the issuance of the Senior Secured Notes in June 1996 (SEE NOTE 3) and the New Credit Facility (SEE NOTE 5). INCOME TAX. The Company recorded income tax expense of $0.1 million YTD compared to an income tax expense of $0.2 million in the prior YTD. NET INCOME (LOSS) AND EBITDA. Net loss YTD of $4.6 million decreased $4.8 million from net income of $0.2 million for the prior YTD for the reasons discussed above. EBITDA, defined as income before taxes, interest, depreciation, amortization, loss (gain) on disposal of property and equipment, write-off of deferred acquisition costs, one-time transition expenses related to acquisitions made by the Company, and expenses related to the Transaction, was $19.6 million YTD compared to $16.7 million for the prior YTD. LIQUIDITY AND SOURCES OF CAPITAL Net cash used for operating activities was $5.7 million through the twenty-six week period ending June 28, 1997, an increase of $6.6 million from the comparable prior year period. This change includes a reduction in accounts payable of approximately $3.5 million resulting from a discounting program with a key supplier and other working capital changes (defined as accounts receivable, inventories, prepaid expenses, other receivables, accounts payable and accrued expenses) associated with the significant increase in the Company's net sales. Capital spending of $4.8 million included $2.4 million for molds and molding machines, $0.3 for printing-related equipment, and $2.1 million for building and accessory equipment. Additionally, Berry purchased PackerWare, certain assets of Container Industries and certain assets of Virginia Design (see Note 4). Berry currently intends to finance capital spending through cash flow from operations, existing cash balances, and cash available under the NationsBank revolving credit agreement. At June 28, 1997, the Company's cash balance was $1.5 million, and Berry had unused borrowing capacity under the New Credit Facility's borrowing base of approximately $20.5 million. PART II. OTHER INFORMATION ITEM 2 (A). CHANGES IN SECURITIES Pursuant to a Consent Solicitation Statement dated May 12, 1997, Berry solicited consents from the holders of its 12 1/4 % Senior Subordinated Notes due 2004 (the "Notes") to effect certain amendments (the "Amendments") to the Indenture dated April 24, 1994, as supplemented, governing the Notes (the "Indenture"). The requisite number of consents was received, and the Amendments became effective on June 10, 1997. Capitalized terms used, but not defined, below have the meanings ascribed to them in the Indenture. The Amendments (a) permit the Subsidiaries, in addition to Berry, to incur Indebtedness and issue Disqualified Stock if the applicable Fixed Charge Coverage Ratio is achieved; (b) in determining whether the applicable Fixed Charge Coverage Ratio has been achieved, permit the inclusion of the earnings of any business acquired by any Subsidiary, in addition to any business acquired by Berry, with the proceeds of Indebtedness incurred or Disqualified Stock issued by Berry or any such Subsidiary; (c) permit the Subsidiaries, in addition to Berry, to incur Refinancing Indebtedness; (d) permit Berry and the Subsidiaries to purchase, redeem or otherwise acquire or retire for value any Indebtedness between or among Berry and its Subsidiaries or between or among such Subsidiaries; and (e) correct the inadvertent omission of the word "and" in the definition of "Permitted Refinancing." ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS As described under Item 3 above, Berry solicited consents from the holders of the Notes to effect the Amendments to the Indenture. The consent of the holders of greater than 99% of the Notes was received. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: None (b) Reports on Form 8-K: None SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Berry Plastics Corporation BPC Holding Corporation Berry Iowa Corporation Berry Tri-Plas Corporation August 12, 1997 /S/ JAMES M. KRATOCHVIL James M. Kratochvil Vice President, Chief Financial Officer, Treasurer and Secretary of Berry Plastics Corporation and its Subsidiaries (Principal Financial and Accounting Officer) EX-27 2
5 1000 6-MOS DEC-27-1997 JUN-28-1997 1501 0 30870 845 21482 55407 139051 57199 188373 38844 215400 0 11362 6 (114391) 188373 105936 0 82167 95953 0 181 15550 (4,501) 92 (4593) 0 0 0 (4593) 0 0
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