FILED PURSUANT TO RULE 424(B)(3)
File Number 333-97849
BERRY PLASTICS CORPORATION
SUPPLEMENT NO. 1 TO MARKET-MAKING PROSPECTUS DATED
AUGUST 19, 2002
THE DATE OF THIS SUPPLEMENT IS NOVEMBER 12, 2002
ON NOVEMBER 12, 2002, BPC HOLDING CORPORATION FILED THE ATTACHED
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 28, 2002
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 28, 2002
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from___________________to__________________
Commission File Number 33-75706
BPC HOLDING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 35-1814673
(State or other jurisdiction (IRS employer
of incorporation or organization) identification number)
BERRY PLASTICS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 35-1813706
(State or other jurisdiction (IRS employer
of incorporation or organization) identification number)
101 Oakley Street 47710
Evansville, Indiana
(Address of principal executive offices) (Zip code)
Registrants' telephone number, including area code: (812) 424-2904
NONE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by 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 issuers' classes of
common stock, as of the latest practicable date:
As of November 1, 2002, the following shares of capital stock of BPC Holding
Corporation were outstanding: 2,767,279 shares of Common Stock, $.01 par
value, of BPC Holding Corporation. As of November 1, 2002, there were
outstanding 100 shares of the Common Stock, $.01 par value, of Berry
Plastics Corporation.
1
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
THIS FORM 10-Q CONTAINS STATEMENTS THAT CONSTITUTE FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). THOSE STATEMENTS
APPEAR IN A NUMBER OF PLACES IN THIS FORM 10-Q AND INCLUDE STATEMENTS
REGARDING THE INTENT, BELIEF OR CURRENT EXPECTATIONS OF THE COMPANY.
WITHOUT LIMITING THE FOREGOING, THE WORDS "BELIEVES," "ANTICIPATES,"
"PLANS," "EXPECTS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-
LOOKING STATEMENTS. ANY SUCH FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES
OF FUTURE PERFORMANCE AND MAY INVOLVE RISKS AND UNCERTAINTIES, AND ACTUAL
RESULTS MAY DIFFER FROM THOSE IN THE FORWARD-LOOKING STATEMENTS AS A RESULT
OF VARIOUS FACTORS. VARIOUS ECONOMIC AND COMPETITIVE FACTORS COULD CAUSE
ACTUAL RESULTS OR EVENTS TO DIFFER MATERIALLY FROM THOSE DISCUSSED IN SUCH
FORWARD-LOOKING STATEMENTS. THE ACCOMPANYING INFORMATION CONTAINED IN THIS
FORM 10-Q, INCLUDING, WITHOUT LIMITATION, THE INFORMATION SET FORTH UNDER
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS," IDENTIFIES IMPORTANT FACTORS THAT COULD CAUSE DIFFERENCES,
INCLUDING THE COMPANY'S ABILITY TO PASS THROUGH RAW MATERIAL PRICE INCREASES
TO ITS CUSTOMERS, ITS ABILITY TO SERVICE DEBT, THE AVAILABILITY OF PLASTIC
RESIN, THE IMPACT OF CHANGING ENVIRONMENTAL LAWS AND CHANGES IN THE LEVEL OF
THE COMPANY'S CAPITAL INVESTMENT. ALTHOUGH MANAGEMENT BELIEVES IT HAS THE
BUSINESS STRATEGY AND RESOURCES NEEDED FOR IMPROVED OPERATIONS, FUTURE
REVENUE AND MARGIN TRENDS CANNOT BE RELIABLY PREDICTED.
2
BPC HOLDING CORPORATION
BERRY PLASTICS CORPORATION
FORM 10-Q INDEX
FOR QUARTERLY PERIOD ENDED SEPTEMBER 28, 2002
PAGE NO.
Part I. Financial Information
Item 1. Financial Statements (unaudited):
Consolidated Balance Sheets 4
Consolidated Statements of Operations 6
Consolidated Statements of Cash Flows 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 19
Item 3. Quantitative and Qualitative Disclosures about 23
Market Risk
Item 4. Controls and Procedures 23
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 24
Item 4. Submission of Matters to a Vote of Security
Holders 24
Item 6. Exhibits and Reports on Form 8-K 25
SIGNATURE 26
CERTIFICATIONS 27
3
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BPC Holding Corporation and Subsidiaries
Consolidated Balance Sheets
(In Thousands of Dollars)
COMPANY PREDECESSOR
----------- -----------
SEPTEMBER 28, DECEMBER 29,
2002 2001
----------- -----------
(UNAUDITED)
Assets
Current assets:
Cash and cash equivalents $ 13,231 $ 1,232
Accounts receivable (less allowance for
doubtful accounts of $2,114 at September 28,
2002 and $2,070 at December 29, 2001) 63,069 48,623
Inventories:
Finished goods 47,667 43,048
Raw materials and supplies 16,767 13,009
----------- -----------
64,434 56,057
Prepaid expenses and other receivables 5,698 5,280
----------- -----------
Total current assets 146,432 111,192
Property and equipment:
Land 9,074 9,443
Buildings and improvements 60,250 72,722
Machinery, equipment and tooling 120,352 201,357
Construction in progress 32,199 22,647
----------- -----------
221,875 306,169
Less accumulated depreciation 8,176 102,952
----------- -----------
213,699 203,217
Intangible assets:
Deferred financing fees, net 19,455 8,475
Intangibles 423,072 121,878
----------- -----------
442,527 130,353
Other 72 2,114
----------- -----------
Total assets $ 802,730 $ 446,876
=========== ===========
4
BPC Holding Corporation and Subsidiaries
Consolidated Balance Sheets (continued)
(In Thousands of Dollars, except per share data)
COMPANY PREDECESSOR
----------- -----------
SEPTEMBER 28, DECEMBER 29,
2002 2001
----------- -----------
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 37,358 $ 34,862
Accrued expenses and other liabilities 10,467 8,955
Accrued interest 8,506 7,964
Employee compensation and payroll taxes 19,588 17,792
Current portion of long-term debt 8,680 22,292
----------- -----------
Total current liabilities 84,599 91,865
Long-term debt, less current portion 600,084 463,589
Accrued dividends on preferred stock - 27,446
Deferred income taxes 547 489
Other liabilities 1,891 3,088
----------- -----------
687,121 586,477
Stockholders' equity (deficit):
Preferred stock; (Predecessor) - 47,789
Common stock (Predecessor) - 6
Treasury stock (Predecessor) - (405)
Warrants (Predecessor) - 9,386
Common stock; $.01 par value: 5,000,000 shares
authorized; 2,767,279 shares issued and outstanding 28 -
Additional paid-in capital 271,057 25,315
Adjustment of the carryover basis of
continuing stockholders (145,404) -
Notes receivable - common stock (14,038) -
Retained earnings (deficit) 3,704 (220,263)
Accumulated other comprehensive income (loss) 262 (1,429)
----------- -----------
Total stockholders' equity (deficit) 115,609 (139,601)
----------- -----------
Total liabilities and stockholders'equity (deficit) $ 802,730 $ 446,876
=========== ===========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
BPC Holding Corporation and Subsidiaries
Consolidated Statements of Operations
(In Thousands of Dollars)
COMPANY PREDECESSOR COMPANY PREDECESSOR
------------ --------------------- ------------ ---------------------
PERIOD PERIOD PERIOD PERIOD
FROM FROM 13 WEEKS FROM FROM 39 WEEKS
7/22/02- 6/30/02- ENDED 7/22/02- 12/30/01- ENDED
9/28/02 7/21/02 9/29/01 9/28/02 7/21/02 9/29/01
---------- ---------- ---------- ---------- ---------- ----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net sales $ 97,822 $ 29,753 $ 121,910 $ 97,822 $ 280,677 $ 362,923
Cost of goods sold 75,309 22,183 91,311 75,309 207,458 264,330
---------- ---------- ---------- ---------- ---------- ----------
Gross profit 22,513 7,570 30,599 22,513 73,219 98,593
Operating Expenses:
Selling 4,612 1,146 5,551 4,612 12,080 16,977
General and administrative 4,050 1,540 6,310 4,050 15,750 22,558
Research and development 553 133 564 553 1,438 1,495
Amortization of intangibles 102 374 3,290 102 1,249 9,386
Merger expenses (Predecessor) - 20,987 - - 20,987 -
Other expenses 596 679 700 596 2,804 2,993
---------- ---------- ---------- ---------- ---------- ----------
Operating income (loss) 12,600 (17,289) 14,184 12,600 18,911 45,184
Other expenses:
Loss on disposal of
property and equipment 56 - 433 56 291 389
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before
interest, taxes, and
extraordinary item 12,544 (17,289) 13,751 12,544 18,620 44,795
Interest:
Expense (8,876) (3,160) (13,500) (8,876) (28,747) (41,507)
Income 123 2 9 123 5 33
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before
income taxes and
extraordinary item 3,791 (20,447) 260 3,791 (10,122) 3,321
Income taxes 87 - 84 87 345 215
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) before
extraordinary item 3,704 (20,447) 176 3,704 (10,467) 3,106
Extraordinary item (less
applicable income taxes
of $0) - 25,328 - - 25,328 -
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) 3,704 (45,775) 176 3,704 (35,795) 3,106
Preferred stock dividends - (848) (2,610) - (6,468) (7,094)
Amortization of preferred
stock discount - (62) (256) - (574) (768)
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)
attributable to common
stockholders $ 3,704 $ (46,685) $ (2,690) $ 3,704 $ (42,837) $ (4,756)
========== ========== ========== ========== ========== ==========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
6
BPC Holding Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands of Dollars)
COMPANY PREDECESSOR
-------------------------------------
PERIOD PERIOD NINE
FROM FROM MONTHS
7/22/02- 12/30/01- ENDING
9/28/02 7/21/02 9/29/01
--------------------------------------
(Unaudited) (Unaudited) (Unaudited)
OPERATING ACTIVITIES
Net income (loss) $ 3,704 $(35,795) $ 3,106
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation 8,176 23,526 27,756
Non-cash interest expense 446 1,399 14,855
Amortization 102 1,249 9,386
Non-cash compensation expense - 1,920 450
Extinguishment of debt - 25,328 -
Loss on sale of property and equipment 57 291 389
Changes in operating assets and
liabilities:
Accounts receivable, net 2,138 (15,986) (8,906)
Inventories (5,582) (4,255) 3,350
Prepaid expenses and other
receivables (50) (603) (3,475)
Other assets - 2,042 32
Payables and accrued expenses (4,512) 11,476 10,394
---------- ---------- ----------
Net cash provided by operating activities 4,479 10,592 57,337
INVESTING ACTIVITIES
Additions to property and equipment (5,371) (17,396) (23,943)
Proceeds from disposal of property and 6 9 96
equipment
Transaction costs (12,715) - -
Acquisitions of businesses - (3,834) (23,513)
---------- ---------- ----------
Net cash used for investing activities (18,080) (21,221) (47,360)
FINANCING ACTIVITIES
Proceeds from long-term borrowings 580,000 24,492 2,000
Payments on long-term borrowings (503,082) (13,924) (20,470)
Issuance of common stock 257,047 - 291
Issuance of preferred stock and warrants - - 10,000
Redemption of predecessor stock (287,999) - -
Debt financing costs (19,810) - (1,009)
---------- ---------- ----------
Net cash provided by (used for)
financing activities 26,156 10,568 (9,188)
Effect of exchange rate changes on cash 320 (815) 449
---------- ---------- ----------
Net increase (decrease) in cash and cash
equivalents 12,875 (876) 1,238
Cash and cash equivalents at beginning
of period 356 1,232 2,054
---------- ---------- ----------
Cash and cash equivalents at end of
period $ 13,231 $ 356 $ 3,292
========== ========== ==========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
7
BPC Holding Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands of dollars, except as otherwise noted)
(Unaudited)
1. Basis of Presentation
THE ACCOMPANYING UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF BPC HOLDING
CORPORATION AND ITS SUBSIDIARIES HAVE BEEN PREPARED IN ACCORDANCE WITH
ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES 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 ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE
UNITED STATES 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. AS A RESULT OF THE MERGER
DESCRIBED IN NOTE 2 BELOW, THE FINANCIAL STATEMENTS HAVE BEEN PRESENTED
SEPARATELY FOR HOLDING'S PRIOR OWNERSHIP THROUGH THE MERGER DATE
("PREDECESSOR") AND SUBSEQUENT TO THE MERGER ("COMPANY"). THESE FINANCIAL
STATEMENTS AND RELATED NOTES SHOULD BE READ IN CONNECTION WITH THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS AND FOOTNOTES THERETO INCLUDED IN
HOLDING'S AND BERRY'S FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION FOR THE YEAR ENDED DECEMBER 29, 2001.
2. THE MERGER
On July 22, 2002, GS Berry Acquisition Corp. (the "Buyer") merged (the
"Merger") with and into BPC Holding Corporation, pursuant to the Agreement
and Plan of Merger (as amended, the "Merger Agreement"), dated as of May 25,
2002, by and among Buyer, GS Capital Partners 2000 Offshore, L.P., GS
Capital Partners 2000 GMBH & Co. Beteiligungs KG, Bridge Street Special
Opportunities Fund 2000, L.P., GS Capital Partners 2000 Employee Fund, L.P.,
Stone Street Fund 2000, L.P., BPC Holding, Berry Plastics Corporation and
certain stockholders and warrant holders of BPC Holding. At the effective
time of the Merger, (i) each share of common stock of BPC Holding
Corporation issued and outstanding immediately prior to the effective time
of the Merger was converted into the right to receive cash pursuant to the
terms of the Merger Agreement, and (ii) each share of common stock of the
Buyer issued and outstanding immediately prior to the effective time of the
Merger was converted into one share of common stock of BPC Holding.
The total amount of funds required to consummate the Merger and to pay
estimated fees and expenses related to the Merger, including amounts related
to the repayment of indebtedness, the redemption of the outstanding
preferred stock and the payment of transaction costs incurred by Holding,
were approximately $869.2 million (which includes the amount of certain
indebtedness which will remain outstanding and the value of certain shares
of Holding common stock held by our employees that were contributed to the
Buyer immediately prior to the Merger). The Buyer and its affiliates own
approximately 63% of the common stock of Holding. The remaining common
stock of Holding is held by J.P. Morgan Partners Global Investors, L.P. and
other private equity funds affiliated with J.P. Morgan Partners, LLC, the
private equity investment arm of J.P. Morgan Chase & Co., which own
approximately 29% of Holding's common stock and by members of Berry's
management, which own the remaining 8%. The Company loaned approximately
$14.0 million to management in order to purchase a portion of the common
equity.
8
The Merger has been accounted for under the purchase method of accounting,
and accordingly, the purchase price has been allocated to the identifiable
assets and liabilities based on estimated fair values at the acquisition
date. The allocation is preliminary and is subject to change pending the
finalization of expenses related to the Merger, completion of property
appraisals, and identification of definite and indefinite lived intangible
assets. The Company has applied the provisions of Emerging Issues Task
Force 88-16, whereby, the carryover equity interests of certain shareholders
from the Predecessor to the Successor were recorded at their Predecessor
basis. The application of these provisions reduced stockholder's equity and
intangibles by $145.4 million. In connection with the Merger, the
Predecessor incurred Merger related expenses of approximately $21.0 million,
consisting primarily of investment banking fees, bonuses to management, non-
cash modification of stock option awards, legal costs, and fees to the
largest voting stockholder of the Predecessor. In addition, as a result of
extinguishing debt in connection with the Merger, $6.6 million of existing
deferred financing fees and $18.7 million of prepayment fees and related
charges were charged to expense in the quarter as an extraordinary item.
The following table summarizes the preliminary allocation of purchase price.
Purchase price $ 836,708
Estimated buyer transaction costs 12,715
Net tangible assets acquired (280,947)
Adjustment for carryover basis of continuing stockholders (145,404)
-----------
Intangibles $423,072
===========
As part of the Merger, the Company incurred $12.7 million of transaction
costs, of which $8.0 million was paid to entities affiliated with GS Capital
Partners 2000 Offshore, L.P., GS Capital Partners 2000 GMBH & Co.
Beteiligungs KG, Bridge Street Special Opportunities Fund 2000, L.P., GS
Capital Partners 2000 Employee Fund, L.P., and Stone Street Fund 2000, L.P.
for services provided to consummate the Merger.
3. Recent Acquisitions
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% predecessor preferred stock and additional
borrowings under the retired senior credit facility. The operations of
Pescor are included in Berry's operations since the acquisition date using
the purchase method of accounting.
On January 24, 2002, Berry acquired the Alcoa Flexible Packaging injection
molding assets of Mt. Vernon Plastics Corporation ("Mount Vernon") for
aggregate consideration of approximately $2.6 million. The purchase price
was allocated to fixed assets ($2.0 million) and inventory ($0.6 million).
The purchase was financed through borrowings under the Company's revolving
line of credit under its retired senior credit facility. The operations of
Mount Vernon are included in Berry's operations since the acquisition date
using the purchase method of accounting. On January 31, 2002, Berry entered
into a sale/leaseback arrangement with respect to the Mt. Vernon fixed
assets.
The pro forma results listed below are unaudited and reflect purchase
accounting adjustments assuming the Pescor acquisition, Mount Vernon
acquisition, and the Merger occurred on December 31, 2000.
Thirteen Weeks Ended Thirty-nine Weeks Ended
---------------------------------------------------------------
SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29,
2002 2001 2002 2001
---------------------------------------------------------------
Pro forma net sales $127,575 $125,986 $379,609 $387,266
Pro forma net income (loss) 4,552 (548) 17,567 (616)
9
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 (amortization through December 29, 2001),
net of the applicable income tax effects. In addition, for the Merger, pro
forma adjustments have only been made to eliminate the Merger related
expenses, including the extinguishment of debt, and reflect the interest
expense reduction from the new financing.
4. LONG-TERM DEBT
Long-term debt consists of the following:
COMPANY PREDECESSOR
---------------------------------
SEPTEMBER 28, DECEMBER 29,
2002 2001
---------------------------------
Holding 12.50% Senior Secured Notes $ - $ 135,714
Berry 12.25% Senior Subordinated Notes - 125,000
Berry 11% Senior Subordinated Notes - 75,000
Berry 10 3/4% Senior Subordinated Notes 250,000 -
Term loans 330,000 54,596
Revolving lines of credit 532 49,053
Second Lien Senior Credit Facility - 25,000
Nevada Industrial Revenue Bonds 2,500 3,000
Capital leases 25,732 18,131
Debt premium, net - 387
-------------- --------------
608,764 485,881
Less current portion of long-term debt 8,680 22,292
-------------- --------------
$600,084 $463,589
============== ==============
The current portion of long-term debt at September 28, 2002 consists of $3.3
million of term loans payable in quarterly installments, $0.5 million in
repayments of the industrial bonds, and $4.9 million in principal payments
related to capital lease obligations. In fiscal 2002, Berry has entered
into various capital lease obligations with no immediate cash flow effect
resulting in capitalized property and equipment and corresponding capital
lease obligations of $17,075.
On July 22, 2002, Berry completed an offering of $250.0 million aggregate
principal amount of 10 3/4 % Senior Subordinated Notes due 2012 (the "2002
Notes"). The net proceeds to Berry from the sale of the 2002 Notes, after
expenses, were $239.4 million. The proceeds from the 2002 Notes were used
in the financing of the Merger. The 2002 Notes mature on July 15, 2012, and
interest is payable semi-annually on January 15 and July 15 of each year
beginning January 15, 2003. Holding and all of Berry's domestic
subsidiaries fully, jointly, severally, and unconditionally guarantee on a
senior subordinated basis the 2002 Notes. The 2002 Notes are not guaranteed
by the foreign subsidiaries: Berry Plastics Acquisition Corporation II, NIM
Holdings Limited, Berry Plastics U.K. Limited, Norwich Acquisition Limited,
CBP Holdings S.r.l., Capsol Berry Plastics S.p.a., or Ociesse S.r.l.
10
IN CONNECTION WITH THE MERGER, BERRY ENTERED INTO A NEW CREDIT AND GUARANTY
AGREEMENT DATED AS OF JULY 22, 2002 ("CREDIT AGREEMENT") WITH A SYNDICATE OF
LENDERS LED BY GOLDMAN SACHS CREDIT PARTNERS L.P., AS ADMINISTRATIVE AGENT,
FOR A SENIOR SECURED CREDIT FACILITY (THE "CREDIT FACILITY"). AS OF
SEPTEMBER 28, 2002, THE CREDIT FACILITY PROVIDES BERRY WITH (I) A $330.0
MILLION TERM LOAN, (II) A $100.0 MILLION REVOLVING LINE OF CREDIT, AND (III)
A $50 MILLION DELAYED DRAW FACILITY, SUBJECT TO CERTAIN LIMITATIONS. AS OF
SEPTEMBER 28, 2002, BERRY HAD $94.1 MILLION AVAILABLE UNDER THE REVOLVING
LINE OF CREDIT. THE INDEBTEDNESS UNDER THE CREDIT AGREEMENT IS GUARANTEED
BY HOLDING AND ALL OF ITS DOMESTIC SUBSIDIARIES. THE OBLIGATIONS OF BERRY
UNDER THE CREDIT AGREEMENT AND THE GUARANTEES THEREOF ARE SECURED BY
SUBSTANTIALLY ALL OF THE ASSETS OF SUCH ENTITIES, INCLUDING A PLEDGE OF ALL
THE CAPITAL STOCK OF THE DOMESTIC SUBSIDIARIES AND 65% OF ALL THE CAPITAL
STOCK OF EACH OF THE FOREIGN SUBSIDIARIES. In October 2002, Berry entered
into an interest rate collar arrangement to protect $50.0 million of the
outstanding variable rate term loan debt from future interest rate
volatility. The collar floor is set at 1.97% LIBOR (London Interbank
Offering Rate) and capped at 6.75% LIBOR. THE CREDIT FACILITIES ABOVE
CONTAIN VARIOUS FINANCIAL AND NON-FINANCIAL COVENANTS.
11
5. 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 the Predecessor's largest voting stockholder ("Adjusted
EBITDA"). One-time expenses primarily represent non-recurring expenses that
relate to recently acquired businesses, Merger related expenses, and plant
consolidations. In the thirteen weeks ended September 28, 2002, $21.0
million of expenses related to the Merger are included in one-time expense
in the following chart. Predecessor and Company results have been combined
as this is consist with the review of senior management. The accounting
policies of the reportable segments are the same as those described in the
summary of significant accounting policies in the Company's Form 10-K filed
with the Securities and Exchange Commission for the year ended December 29,
2001.
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
-------------------------------------------------------------------
SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29,
2002 2001 2002 2001
-------------------------------------------------------------------
Net sales:
Containers $ 65,767 $ 61,481 $ 188,382 $ 184,427
Closures 32,833 34,094 100,661 102,483
Consumer Products 28,975 26,335 89,456 76,013
Adjusted EBITDA:
Containers 17,885 16,568 51,065 50,345
Closures 7,232 7,452 23,161 21,799
Consumer Products 3,489 4,275 15,057 14,372
Total assets:
Containers 379,164 213,257 379,164 213,257
Closures 260,062 162,162 260,062 162,162
Consumer Products 163,504 85,061 163,504 85,061
Reconciliation of Adjusted EBITDA
to income (loss) before income
taxes and extraordinary item:
Adjusted EBITDA for reportable
segments $ 28,606 $ 28,295 $ 89,283 $ 86,516
Net interest expense (11,912) (13,491) (37,495) (41,474)
Depreciation (10,604) (9,714) (31,702) (27,756)
Amortization (476) (3,290) (1,351) (9,386)
Loss on disposal of property and
equipment (56) (433) (348) (389)
One-time expenses (22,214) (745) (24,387) (3,103)
Non-cash compensation - (150) - (450)
Management fees - (212) (331) (637)
---------- ---------- ---------- ----------
Income (loss) before income
taxes and extraordinary item $ (16,656) $ 260 $(6,331) $ 3,321
========== ========== ========== ==========
6. COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) consists of net income (loss) adjusted for the
change in cumulative translation gain (loss) for the respective period.
Comprehensive income was $4.6 million for the Company from July 22, 2002 to
September 28, 2002. Comprehensive income (loss) for the Predecessor was
$(45.8) million and $(35.0)million for the period from June 30, 2002 to July
21, 2002 and from December 30, 2001 to July 21, 2002, respectively, and $0.9
million and $2.7 million for the thirteen and thirty-nine weeks ended
September 29, 2001, respectively.
12
7. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (IN THOUSANDS)
Holding conducts its business through its wholly owned subsidiary, Berry.
Berry and all of Berry's subsidiaries are 100% owned by Holding. After the
Merger, Holding and all existing and future domestic subsidiaries of the
Company guarantee on a senior subordinated basis the $250.0 million
aggregate principal amount of 10 3/4 % Berry Plastics Corporation Senior
Subordinated Notes due 2012. Separate narrative information or financial
statements of guarantor and non-guarantor subsidiaries have not been
included as management believes they would not be material to investors.
Presented below is condensed consolidating financial information for
Holding, Berry, and its subsidiaries at September 28, 2002 (the Company) and
December 29, 2001 (Predecessor) and for thirteen and thirty-nine weeks ended
September 28, 2002 (Combined Company and Predecessor) and September 29, 2001
(Predecessor). The equity method has been used with respect to investments
in subsidiaries.
SEPTEMBER 28, 2002 (COMPANY)
-------------------------------------------------------------------------------------------------
BPC Holding Berry Plastics Combined Combined
Corporation Corporation Guarantor Non Guarantor Consolidating
(Parent) (Issuer) SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
--------------- --------------- --------------- ------------- --------------- --------------
CONSOLIDATING BALANCE SHEET
Current assets $ 114 $ 56,616 $ 78,254 $ 11,448 $ - $ 146,432
Net property and equipment - 82,060 116,973 14,666 - 213,699
Other noncurrent assets 115,495 513,579 92,476 19,597 (298,548) 442,599
---------- ---------- ---------- ---------- ---------- ----------
Total assets $115,609 $652,255 $287,703 $45,711 $(298,548) $ 802,730
========== ========== ========== ========== ========== ==========
Current liabilities $ - $ 49,155 $ 29,010 $ 6,434 $ - $ 84,599
Noncurrent liabilities - 598,969 263,114 31,939 (291,500) 602,522
Equity (deficit) 115,609 4,131 (4,421) 7,338 (7,048) 115,609
---------- ---------- ---------- ---------- ---------- ----------
Total liabilities
and equity (deficit) $ 115,609 $ 652,255 $ 287,703 $ 45,711 $ (298,548) $ 802,730
========== ========== ========== ========== ========== ==========
DECEMBER 29, 2001 (PREDECESSOR)
-------------------------------------------------------------------------------------------------
BPC Holding Berry Plastics Combined Combined
Corporation Corporation Guarantor Non Guarantor Consolidating
(Parent) (Issuer) SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
--------------- --------------- --------------- ------------- --------------- --------------
CONSOLIDATING BALANCE SHEET
Current assets $ 440 $ 32,459 $ 68,519 $ 9,774 $ - $ 111,192
Net property and equipment - 71,437 117,176 14,604 - 203,217
Other noncurrent assets 23,980 289,764 91,274 18,358 (290,909) 132,467
---------- ---------- ---------- ---------- ---------- ----------
Total assets $ 24,420 $ 393,660 $ 276,969 $ 42,736 $ (290,909) $ 446,876
========== ========== ========== ========== ========== ==========
Current liabilities $ 861 $ 60,212 $ 22,557 $ 8,235 $ - $ 91,865
Noncurrent liabilities 163,160 311,574 310,244 35,555 (325,921) 494,612
Equity (deficit) (139,601) 21,874 (55,832) (1,054) 35,012 (139,601)
---------- ---------- ---------- ---------- ---------- ----------
Total liabilities
and equity (deficit) $ 24,420 $ 393,660 $ 276,969 $ 42,736 $ (290,909) $ 446,876
========== ========== ========== ========== ========== ==========
13
THIRTEEN WEEKS ENDED SEPTEMBER 28, 2002 (COMBINED COMPANY AND PREDECESSOR)
-------------------------------------------------------------------------------------------------
BPC Holding Berry Plastics Combined Combined
Corporation Corporation Guarantor Non Guarantor Consolidating
(Parent) (Issuer) SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
--------------- --------------- --------------- ------------- --------------- --------------
CONSOLIDATING STATEMENT OF
OPERATIONS
Net sales $ - $ 44,125 $ 78,358 $ 5,092 $ - $ 127,575
Cost of goods sold - 30,452 62,295 4,745 - 97,492
---------- ---------- ---------- ---------- ---------- ----------
Gross profit - 13,673 16,063 347 - 30,083
Operating expenses 20,655 6,149 7,339 629 - 34,772
---------- ---------- ---------- ---------- ---------- ----------
Operating income (loss) (20,655) 7,524 8,724 (282) - (4,689)
Other expenses - - 56 - - 56
Interest expense, net 920 3,673 6,571 747 - 11,911
Income taxes (benefit) 5 109 15 (42) - 87
Extraordinary item 9,282 15,844 - 202 _ 25,328
Equity in net (income)
loss from subsidiary 11,209 (893) - - (10,316) -
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) $(42,071) $(11,209) $ 2,082 $(1,189) $ 10,316 $(42,071)
========== ========== ========== ========== ========== ==========
THIRTEEN WEEKS ENDED SEPTEMBER 29, 2001(PREDECESSOR)
-------------------------------------------------------------------------------------------------
BPC Holding Berry Plastics Combined Combined
Corporation Corporation Guarantor Non Guarantor Consolidating
(Parent) (Issuer) SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
--------------- --------------- --------------- ------------- --------------- --------------
CONSOLIDATING STATEMENT OF
OPERATIONS
Net sales $ - $ 41,641 $ 74,828 $ 5,441 $ - $ 121,910
Cost of goods sold - 27,280 58,603 5,428 - 91,311
---------- ---------- ---------- ---------- ---------- ----------
Gross profit - 14,361 16,225 13 - 30,599
Operating expenses 190 5,728 9,760 737 - 16,415
---------- ---------- ---------- ---------- ---------- ----------
Operating income (loss) (190) 8,633 6,465 (724) - 14,184
Other expenses (income) - 59 403 (29) - 433
Interest expense, net 4,352 1,218 7,236 685 - 13,491
Income taxes 4 8 45 27 - 84
Equity in net (income) loss
from subsidiary (4,722) 2,626 - - 2,096 -
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) $ 176 $ 4,722 $ (1,219) $ (1,407) $ (2,096) $ 176
========== ========== ========== ========== ========== ==========
14
THIRTY-NINE WEEKS ENDED SEPTEMBER 28, 2002 (COMBINED COMPANY AND PREDECESSOR)
-------------------------------------------------------------------------------------------------
BPC Holding Berry Plastics Combined Combined
Corporation Corporation Guarantor Non Guarantor Consolidating
(Parent) (Issuer) SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
--------------- --------------- --------------- ------------- --------------- --------------
CONSOLIDATING STATEMENT OF OPERATIONS
Net sales $ - $ 131,165 $ 231,894 $ 15,440 $ - $ 378,499
Cost of goods sold - 87,270 181,465 14,032 - 282,767
---------- ---------- ---------- ---------- ---------- ----------
Gross profit - 43,895 50,429 1,408 - 95,732
Operating expenses 20,706 18,032 23,426 2,057 - 64,221
---------- ---------- ---------- ---------- ---------- ----------
Operating income (loss) (20,706) 25,863 27,003 (649) - 31,511
Other expenses - 98 249 - - 347
Interest expense, net 9,651 5,048 20,658 2,138 - 37,495
Income taxes (benefit) (8,248) 8,228 118 334 - 432
Extraordinary item 9,282 15,844 - 202 - 25,328
Equity in net (income)
loss from subsidiary 700 (2,655) - - 1,955 -
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) $ (32,091) $ (700) $ 5,978 $ (3,323) $ (1,955) $ (32,091)
========== ========== ========== ========== ========== ==========
CONSOLIDATING STATEMENT OF CASH FLOWS
Net income (loss) $ (32,091) $ (700) $ 5,978 $ (3,323) $ (1,955) $ (32,091)
Non-cash expenses 24,770 14,270 20,947 2,507 - 62,494
Equity in net (income) 700 (2,655) - - 1,955 -
loss from subsidiary
Changes in working capital (114) (8,638) (4,780) (1,800) - (15,332)
---------- ---------- ---------- ---------- ---------- ----------
Net cash provided by
(used for) operating
activities (6,735) 2,277 22,145 (2,616) - 15,071
Net cash used for
investing activities - (18,425) (20,516) (360) - (39,301)
Net cash provided by
(used for) financing
activities 6,296 28,587 (1,752) 3,593 - 36,724
Effect on exchange rate
changes on cash - - - (495) - (495)
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease)
in cash and cash
equivalents (439) 12,439 (123) 122 - 11,999
Cash and cash
equivalents at
beginning of period 440 (700) 1,231 261 - 1,232
---------- ---------- ---------- ---------- ---------- ----------
Cash and cash equivalents
at end of period $ 1 $ 11,739 $ 1,108 $ 383 $ - $ 13,231
========== ========== ========== ========== ========== ==========
15
THIRTY-NINE WEEKS ENDED SEPTEMBER 28, 2002 (COMBINED COMPANY AND PREDECESSOR)
-------------------------------------------------------------------------------------------------
BPC Holding Berry Plastics Combined Combined
Corporation Corporation Guarantor Non Guarantor Consolidating
(Parent) (Issuer) SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
--------------- --------------- --------------- ------------- --------------- --------------
Net sales $ - $ 125,539 $ 219,755 $ 17,629 $ - $ 362,923
Cost of goods sold - 81,927 166,439 15,964 - 264,330
---------- ---------- ---------- ---------- ---------- ----------
Gross profit - 43,612 53,316 1,665 - 98,593
Operating expenses 554 18,964 29,819 4,072 - 53,409
---------- ---------- ---------- ---------- ---------- ----------
Operating income (loss) (554) 24,648 23,497 (2,407) - 45,184
Other expenses (income) - 41 405 (57) - 389
Interest expense, net 13,084 6,033 20,359 1,998 - 41,474
Income taxes (benefit) 20 26 71 98 - 215
Equity in net (income)
loss from subsidiary (16,764) 1,784 - - 14,980 -
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) $ 3,106 $ 16,764 $ 2,662 $ (4,446) $ (14,980) $ 3,106
========== ========== ========== ========== ========== ==========
CONSOLIDATING STATEMENT OF CASH FLOWS
Net income (loss) $ 3,106 $ 16,764 $ 2,662 $ (4,446) $ (14,980) $ 3,106
Non-cash expenses 13,523 11,263 24,949 3,101 - 52,836
Equity in net (income)
loss from subsidiary (16,764) 1,784 - - 14,980 -
Changes in working capital - 6,022 (3,248) (1,379) - 1,395
---------- ---------- ---------- ---------- ---------- ----------
Net cash provided by
(used for) operating
activities (135) 35,833 24,363 (2,724) - 57,337
Net cash used for
investing activities - (33,759) (10,795) (2,806) - (47,360)
Net cash provided by
(used for) financing
activities 352 (1,706) (13,256) 5,422 - (9,188)
Effect on exchange
rate changes on cash - - (138) 587 - 449
---------- ---------- ---------- ---------- ---------- ----------
Net increase in cash
and cash equivalents 217 368 174 479 - 1,238
Cash and cash equivalents at
beginning of period 220 642 931 261 - 2,054
---------- ---------- ---------- ---------- ---------- ----------
Cash and cash equivalents
at end of period
period $ 437 $ 1,010 $ 1,105 $ 740 $ - $ 3,292
========== ========== ========== ========== ========== ==========
16
8. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
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 a finite life will continue to be
amortized over their estimated useful lives. The Company adopted the
provisions of SFAS Nos. 141 and 142 as of the beginning of fiscal 2002.
Predecessor has performed the first of the required impairment tests of goodwill
and indefinite lived intangible assets and has determined that no write-down
of the asset values is necessary. 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 adoption of the new
rules. The Merger has been accounted for under the purchase method of
accounting, and accordingly, the purchase price has been allocated to the
identifiable assets and liabilities based on estimated fair values at the
acquisition date. The allocation is preliminary and is subject to change
pending the finalization of expenses related to the Merger, completion of
property appraisals, and identification of definite and indefinite lived
intangible assets. The following table presents the quarterly results of
the Company on a comparable basis:
COMPANY PREDECESSOR COMPANY PREDECESSOR
----------------------------------------------------------
PERIOD PERIOD THREE PERIOD PERIOD NINE
FROM FROM MONTHS FROM FROM MONTHS
7/22/02- 6/30/02- ENDED 7/22/02- 12/30/01- ENDED
9/28/02 7/21/02 9/29/01 9/28/02 7/21/02 9/29/01
----------------------------------------------------------
Reported net income (loss) $3,704 $(45,775) $ 176 $3,704 $(35,795) $ 3,106
Goodwill amortization, net of tax - - 2,596 - - 7,380
----------------------------------------------------------
Adjusted net income (loss) $3,704 $(45,775) $ 2,772 $3,704 $(35,795) $10,486
==========================================================
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 adopted this standard as of the
beginning of fiscal 2002. The application of SFAS No. 144 did not have a
material impact on the Company's results of operations and financial
position.
In April 2002, the FASB issued Statement of Financial Accounting Standards
No. 145, RESCISSION OF FASB STATEMENTS NO. 4, 44 AND 64, AMENDMENT OF FASB
STATEMENT NO. 13 AND TECHNICAL CORRECTIONS (SFAS No. 145). Upon the
adoption of SFAS No. 145, all gains and losses on the extinguishment of debt
for periods presented in the financial statements will be classified as
extraordinary items only if they meet the criteria in APB Opinion No. 30,
REPORTING THE RESULTS OF OPERATIONS - REPORTING THE EFFECTS OF DISPOSAL OF A
SEGMENT OF A BUSINESS, AND EXTRAORDINARY, UNUSUAL AND INFREQUENTLY OCCURRING
EVENTS AND TRANSACTIONS (APB No. 30). The provisions of SFAS No. 145
related to the rescission of FASB Statement No. 4 and FASB Statement No. 64
shall be applied for fiscal years beginning after May 15, 2002. The Company
is currently evaluating the effects, if any, that this standard will have on
its results of operations and financial position. The provisions of SFAS
No. 145 related to the rescission of FASB Statement No. 44, the amendment of
FASB Statement No. 113 and Technical Corrections are effective as of May 15,
2002 and did not have a material impact on the Company.
17
In June 2002, the FASB issued Statement of Financial Accounting Standards
No. 146, ACCOUNTING FOR COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES
(SFAS No.146). SFAS No. 146 nullifies Emerging Issues Task Force (EITF)
Issue No, 94-3, "Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain Costs
Incurred in a Restructuring)." SFAS No. 146 generally requires companies to
recognize costs associated with exit activities when they are incurred
rather than at the date of a commitment to an exit or disposal plan and is
to be applied prospectively to exit or disposal activities initiated after
December 31, 2002. The Company is currently evaluating the effects, if any,
that this standard will have on its results of operations and financial
position.
18
ITEM 2.
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 BPC Holding Corporation ("Holding") and its wholly-
owned subsidiary, Berry Plastics Corporation ("Berry"), and its wholly-owned
subsidiaries. For analysis purposes, the results under Holding's prior
ownership ("Predecessor") have been combined with results subsequent to the
merger on July 22, 2002 ("Company") described below. 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.
On July 22, 2002, GS Berry Acquisition Corp. (the "Buyer") merged (the
"Merger") with and into BPC Holding Corporation, pursuant to the Agreement
and Plan of Merger (as amended, the "Merger Agreement"), dated as of May 25,
2002, by and among Buyer, GS Capital Partners 2000 Offshore, L.P., GS
Capital Partners 2000 GMBH & Co. Beteiligungs KG, Bridge Street Special
Opportunities Fund 2000, L.P., GS Capital Partners 2000 Employee Fund, L.P.,
Stone Street Fund 2000, L.P., BPC Holding, Berry Plastics Corporation and
certain stockholders and warrant holders of BPC Holding. At the effective
time of the Merger, (i) each share of common stock of BPC Holding
Corporation issued and outstanding immediately prior to the effective time
of the Merger was converted into the right to receive cash pursuant to the
terms of the Merger Agreement, and (ii) each share of common stock of the
Buyer issued and outstanding immediately prior to the effective time of the
Merger was converted into one share of common stock of BPC Holding.
The Company remains 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 are at variable rates of interest, which 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.
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 in its Form
10-K filed with the Securities and Exchange Commission for the year ended
December 29, 2001. 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
19
results of operations. The following accounting policies represent the most
critical based on management's analysis due the impact on the Company's
results of operations.
ACCOUNTS RECEIVABLE. The Company evaluates the allowance for doubtful
accounts on a quarterly basis and reviews any significant customers with
delinquent balances to determine future collectibility. The determination
includes a review of legal issues (such as bankruptcy status), past history,
current financial and credit reports, and the experience of the credit
representative. Allowances are established in the quarter in which the
account is deemed uncollectible. The Company maintains additional
allowances based on historical bad debt experience. The Company believes,
based on past history and credit policies, that the net accounts receivable
are of good quality.
MEDICAL. The Company offers medical insurance that is primarily self-insured to
its employees. The Company evaluates the medical claims liability on a
quarterly basis and obtains an independent actuarial analysis on an annual
basis. A liability is accrued for the expected claims incurred but not
reported plus any known claims. Based on its analysis, the Company believes
that the medical claims liability is sufficient.
WORKERS' COMPENSATION. Effective in fiscal 2000, the Company converted the
majority of its facilities to a large deductible program for workers'
compensation insurance. On a quarterly basis, the Company evaluates the
liability based on third-party adjusters' independent analyses by claim.
Based on its analysis, the Company believes that the workers' compensation
liability is sufficient.
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.
RESULTS OF OPERATIONS
13 WEEKS ENDED SEPTEMBER 29, 2002 ("QUARTER")
COMPARED TO 13 WEEKS ENDED SEPTEMBER 29, 2001 ("PRIOR QUARTER")
NET SALES. Net sales increased $5.7 million, or 5%, to $127.6 million for
the Quarter from $121.9 million for the Prior Quarter despite an approximate
3% decrease in net selling price. Container net sales increased $4.3
million from the Prior Quarter with the Mount Vernon acquisition providing
approximately $4.0 million of net sales in the Quarter. Closure net sales
decreased $1.3 million from the Prior Quarter due primarily to shedding low
margin business in the Norwich facility. Consumer product sales for the
Quarter increased $2.6 million from the Prior Quarter primarily due to
increased sales from the thermoformed drink cup line.
GROSS PROFIT. Gross profit decreased by $0.5 million to $30.1 million (24%
of net sales) for the Quarter from $30.6 million (25% of net sales) for the
Prior Quarter. This decrease of 2% includes the combined impact of the
added Mount Vernon sales volume, the effect of net selling prices and raw
material costs, acquisition integration and productivity improvement
initiatives. The historical margin percentage of the Mount Vernon acquired
business is significantly less than the Company's historical gross margins
thereby reducing consolidated margins until the business is fully
integrated. Also, depreciation for the Quarter exceeded the Prior Quarter
by $0.9 million. In addition, the Company has continued to consolidate
products and business of recent acquisitions to the most efficient tooling,
providing customers with improved products and customer service. As part of
the integration, the Company removed the molding operations from its Fort
Worth, Texas facility (acquired in the Pescor acquisition). The business
from this location was distributed throughout Berry's facilities. Also,
significant productivity improvements were made during the Quarter,
20
including the addition of state-of-the-art injection molding equipment,
molds and printing equipment at several of the Company's facilities.
OPERATING EXPENSES. Selling expenses increased by $0.2 million to $5.8
million for the Quarter from $5.6 million for the Prior Quarter principally
as a result of the 5% increase in net sales. General and administrative
expenses decreased from $6.3 million for the Prior Quarter to $5.6 million
for the Quarter. This decrease of $0.7 million is primarily attributable to
decreased accrued bonus expenses and cost reduction efforts. During the
Quarter, one-time transition expenses were $0.2 million related to
acquisitions, $0.8 million related to the shutdown and reorganization of
facilities, $0.3 million related to an acquisition that was not completed,
and $21.0 million related to the Merger. In the Prior Quarter, one-time
transition expenses related to acquisitions were $0.3 million and $0.4
million related to the shutdown and reorganization of facilities.
INTEREST EXPENSE, NET. Net interest expense decreased $1.6 million to $11.9
million for the Quarter compared to $13.5 million for the Prior Quarter
primarily due to decreased rates of interest on borrowings.
INCOME TAX. For the Quarter, the Company recorded income tax expense of
$0.1 million compared to $0.1 million for the Prior Quarter. The Company
continues to operate in a net operating loss carryforward position for
federal income tax purposes.
EXTRAORDINARY ITEM. As a result of extinguishing the Company's debt in
connection with the Merger, $6.6 million of existing deferred financing fees
and $18.7 million of prepayment fees and related charges were charged to
expense in the Quarter as an extraordinary item.
NET INCOME (LOSS). The Company recorded a net loss of $42.1 million for the
Quarter compared to net income of $0.2 million for the Prior Quarter for the
reasons discussed above.
39 Weeks Ended September 28, 2002 ("YTD")
Compared to 39 Weeks Ended September 29, 2001 ("Prior YTD")
NET SALES. Net sales increased $15.6 million, or 4%, to $378.5 million for
the YTD from $362.9 million for the Prior YTD despite an approximate 3%
decrease in net selling price due to the cyclical impact of lower resin
costs. Container net sales increased $4.0 million from the Prior YTD,
including approximately $10.3 million of YTD sales from the Mount Vernon
acquisition. The decrease, excluding the acquisition, can be primarily
attributed to lower selling prices and a large promotion in the Prior YTD.
Closure net sales decreased $1.8 million from the Prior YTD due primarily to
shedding low margin business in the Norwich facility. Consumer product
sales for the YTD increased $13.4 million from the Prior YTD primarily
attributable to the Pescor acquisition and increased sales from the
thermoformed drink cup line.
GROSS PROFIT. Gross profit decreased by $2.9 million to $95.7 million (25%
of net sales) for the YTD from $98.6 million (27% of net sales) for the
Prior YTD. This decrease of 3% includes the combined impact of the added
Pescor and Mount Vernon sales volume, the effect of net selling prices and
raw material costs, acquisition integration and productivity improvement
initiatives. The historical margin percentage of the Mount Vernon acquired
business is significantly less than the Company's historical gross margins
thereby reducing consolidated margins until the business is fully
integrated. Also, depreciation for the YTD exceeded the Prior YTD by $3.9
million. The Company has continued to consolidate products and business of
recent acquisitions to the most efficient tooling, providing customers with
improved products and customer service. As part of the integration, the
Company removed molding operations from its Fort Worth, Texas facility
(acquired in the Pescor acquisition). The business from this location was
distributed throughout Berry's facilities. Also, significant productivity
improvements were made during the year, including the addition of state-of-
the-art injection molding equipment, molds and printing equipment at several
of the Company's facilities.
21
OPERATING EXPENSES. Selling expenses decreased by $0.3 million to $16.7
million for the YTD from $17.0 million for the Prior YTD, principally a
result of cost reduction efforts. General and administrative expenses
decreased from $22.6 million for the Prior YTD to $19.8 million for the YTD.
This decrease of $2.8 million is primarily attributable to decreased accrued
bonus expenses and cost reduction efforts. During the YTD, one-time
transition expenses were $0.9 million related to acquisitions, $2.2 million
related to the shutdown and reorganization of facilities, $0.3 million
related to an acquisition that was not completed, and $21.0 million related
to the Merger. In the Prior YTD, one-time transition expenses related to
acquisitions were $1.4 million and $1.6 million related to the shutdown and
reorganization of facilities.
INTEREST EXPENSE, NET. Net interest expense decreased $4.0 million to $37.5
million for the YTD compared to $41.5 million for the Prior YTD primarily
due to decreased rates of interest on borrowings and reduced borrowings
under the predecessor's senior credit facility.
INCOME TAX. For the YTD, the Company recorded income tax expense of $0.4
million compared to $0.2 million for the Prior YTD. The Company continues
to operate in a net operating loss carryforward position for federal income
tax purposes.
EXTRAORDINARY ITEM. As a result of extinguishing the Company's debt in
connection with the Merger, $6.6 million of existing deferred financing fees
and $18.7 million of prepayment fees and related charges were charged to
expense in the Quarter as an extraordinary item.
NET INCOME (LOSS). The Company recorded a net loss of $32.1 million for the
YTD compared to net income of $3.1 million for the Prior YTD for the reasons
discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $15.1 million for the YTD
compared to $57.3 million for the Prior YTD. The decrease is primarily the
result of expenses related to the Merger.
Net cash used for investing activities decreased from $47.4 million for the
Prior YTD to $39.3 million for the YTD primarily as a result of the Pescor
acquisition in the Prior YTD. YTD capital spending of $22.8 million
included $1.2 million for buildings and systems, $8.6 million for molds,
$9.1 million for molding and printing machines, and $3.9 million for
accessory equipment and systems.
Net cash provided by financing activities was $36.7 million for the YTD
compared to net cash used of $9.2 million for the Prior YTD. The increase
of $45.9 million can be attributed to the financing of the Merger.
In connection with the Merger, Berry received approximately $330.0 million
from a senior term loan from a syndicate of lenders led by Goldman Sachs
Credit Partners L.P., as administrative agent, approximately $250.0 million
from the issuance of 10 3/4 % Senior Subordinated Notes to various private
institutional buyers, and, as a result of the Merger, approximately $268.8
million in equity contributions from affiliates of the Buyer and certain
existing stockholders and members of Berry's management. The $330.0 million
senior term loan is part of Berry's new senior secured credit facility that
also includes a $100.0 million revolving line of credit and a $50.0 million
delayed draw facility, both of which have not been drawn upon. THE CREDIT
FACILITIES ABOVE CONTAIN VARIOUS FINANCIAL AND NON-FINANCIAL COVENANTS.
22
INCREASED WORKING CAPITAL NEEDS OCCUR WHENEVER THE COMPANY EXPERIENCES
STRONG INCREMENTAL DEMAND OR A SIGNIFICANT RISE IN THE COST OF RAW MATERIAL,
PARTICULARLY PLASTIC RESIN. THE COMPANY ANTICIPATES THAT ITS CASH INTEREST,
WORKING CAPITAL AND CAPITAL EXPENDITURE REQUIREMENTS FOR 2002 WILL BE
SATISFIED THROUGH A COMBINATION OF FUNDS GENERATED FROM OPERATING ACTIVITIES
AND CASH ON HAND, TOGETHER WITH FUNDS AVAILABLE UNDER THE REVOLVING LINE OF
CREDIT. MANAGEMENT BASES SUCH BELIEF ON HISTORICAL EXPERIENCE AND THE
SUBSTANTIAL CASH BALANCE AND FUNDS AVAILABLE UNDER THE REVOLVING LINE OF
CREDIT. HOWEVER, THE COMPANY CANNOT PREDICT ITS FUTURE RESULTS OF
OPERATIONS. AS OF SEPTEMBER 28, 2002, THE COMPANY HAD $94.1 MILLION
AVAILABLE UNDER THE REVOLVING LINE OF CREDIT AND $13.2 MILLION IN CASH AND
CASH EQUIVALENTS.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk changes in interest rates
primarily through its senior credit facility. The Company utilizes
interest rate instruments to reduce the impact of either increases or
decreases in interest rates on its floating rate debt. As a result of
the current economic slowdown and corresponding interest rate
reductions, Berry entered into an interest rate collar arrangement in
October 2002 to protect $50.0 million of the outstanding variable rate
term loan debt from future interest rate volatility. The collar floor
is set at 1.97% LIBOR (London Interbank Offering Rate) and capped at
6.75% LIBOR. The Company is of the opinion that it is well positioned
to manage interest exposures in the short term.
The Company is also subject to market risks with respect to pricing of
its primary raw material (resin). Plastic resins are subject to
cyclical price fluctuations, including those arising from supply
shortages and changes in the prices of natural gas, crude oil and
other petrochemical intermediates from which resins are produced.
Management believes based on past experience that Berry can pass on a
significant portion of any increase in resin costs over a period of
time, but there may be a short-term negative impact to its financial
performance. The Company also mitigates this risk by increasing resin
inventories through its large infrastructure.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures.
As required by new Rule 13a-15 under the Securities Exchange Act
of 1934, within the 90 days prior to the date of this report, the
Company carried out an evaluation under the supervision and with
the participation of the Company's management, including the
Company's Chief Executive Officer and Chief Financial Officer, of
the effectiveness of the design and operation of the Company's
disclosure controls and procedures. Based upon that evaluation,
the Chief Executive Officer and Chief Financial Officer concluded
that the Company's disclosure controls and procedures are
effective to ensure that information required to be disclosed by
the Company in the reports it files or submits under the Exchange
Act is recorded, processed, summarized and reported, within the
time periods specified in the Securities and Exchange Commission's
rules and forms. In connection with the new rules, we currently
are in the process of further reviewing and documenting our
disclosure controls and procedures, including our internal
controls and procedures for financial reporting, and may from time
to time make changes aimed at enhancing their effectiveness and to
ensure that our systems evolve with our business.
(b) Changes in internal controls.
None
23
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In connection with the Merger, on July 22, 2002, Berry consummated
concurrent cash tender offers and consent solicitations with respect
to its then-outstanding 12 1/4 % Senior Subordinated Notes issued by
Berry and due 2004 (the "12 1/4 % Notes"), 12 1/4 % Series B Senior
Subordinated Notes issued by Berry and due 2004 (the "12 1/4 % Series
B Notes"), and 11% Senior Subordinated Notes issued by Berry and due
2007 (the "11% Notes"). Also in connection with the Merger, on July
22, 2002, Holding consummated a cash tender offer and consent
solicitation with respect to its then-outstanding 12 1/2 % Senior
Secured Notes issued by Holding and due 2006 (the "12 1/2 % Notes" and
together with the 11% Notes, the 12 1/4 % Notes and the 12 1/4 %
Series B Notes, the "Notes"). Upon the consummation of the tender
offers and consent solicitations for the Notes (the "Offers"), each of
the indentures governing the Notes was amended to eliminate the
significant restrictive covenants and related events of default
contained in such indentures. Substantially all of the Notes were
tendered and purchased by Berry and Holding and, on August 21, 2002,
Berry and Holding consummated the redemption of all outstanding Notes
not purchased pursuant to the Offers. After the consummation of such
redemption, no Notes remained outstanding.
Also in connection with the Merger, on July 22, 2002, Holding merged
with GS Berry Acquisition Corp. (the "Buyer"), whereby each share of
common stock of the Buyer issued and outstanding immediately prior to
the effective time of the Merger was converted into one share of
Common Stock of Holding. Accordingly, at the time of the Merger, an
aggregate of approximately 2,700,000 shares of Holding's Common Stock,
with an aggregate value of $272,625,109, were issued to GS Capital
Partners 2000, L.P., GS Capital Partners 2000 Offshore, L.P., GS
Capital Partners 2000 GMBH & Co. Beteiligungs KG, Bridge Street
Special Opportunities Fund 2000, L.P., GS Capital Partners 2000
Employee Fund, L.P., Stone Street Fund 2000, L.P., Goldman Sachs
Direct Investment Fund 2000, L.P., J.P. Morgan Partners (BHCA), L.P.,
J.P. Morgan Partners Global Investors, L.P., J.P. Morgan Partners
Global Investors (Cayman), L.P., J.P. Morgan Partners Global Investors
(Cayman) II, L.P., J.P. Morgan Partners Global Investors A, L.P. and
members of management. No underwriters were used for the offering,
and there were no underwriting discounts or commissions. The offering
was exempt from registration under the Securities Act of 1933 pursuant
to Rule 506 of Regulation D promulgated thereunder, as there were less
than 35 purchasers of the Common Stock and the nature of the
purchasers complied with Rule 506.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On July 22, 2002, in connection with the Merger, Holding, as the sole
stockholder of Berry, executed a written consent pursuant to Section
228 of the General Corporation Law of the State of Delaware electing
the following people to the Board of Directors of Berry: Joseph H.
Gleberman, Douglas F. Londal, Patrick J. Dalton and Christopher C.
Behrens. Ira G. Boots and Mathew J. Lori continued on as directors of
Berry.
On July 15, 2002, the holders of a majority of Holding's Common Stock
and each class of its then-outstanding Series C Preferred Stock
executed a written consent pursuant to Section 228 of the General
Corporation Law of the State of Delaware, whereby such stockholders
approved an amendment to Holding's Amended and Restated Certificate of
Incorporation so as to decrease the stated value and liquidation
preference of each share of Holding's Class C Preferred Stock. The
Class C Preferred Stock was redeemed in connection with the Merger.
24
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
1 Exhibits:
NONE
(B) REPORTS ON FORM 8-K:
NONE
25
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BPC Holding Corporation
Berry Plastics Corporation
November 11, 2002
By: /S/ JAMES M. KRATOCHVIL
James M. Kratochvil
Executive Vice President, Chief Financial
Officer, Treasurer and Secretary of the
entities listed above (Principal Financial
and Accounting Officer)
26
CERTIFICATIONS
I, Ira G. Boots, certify that:
1. I have reviewed this quarterly report on Form 10-Q of BPC Holding
Corporation and Berry Plastics Corporation;
2. BASED ON MY KNOWLEDGE, THIS QUARTERLY REPORT DOES NOT CONTAIN ANY UNTRUE
STATEMENT OF A MATERIAL FACT OR OMIT TO STATE A MATERIAL FACT NECESSARY TO
MAKE THE STATEMENTS MADE, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH SUCH
STATEMENTS WERE MADE, NOT MISLEADING WITH RESPECT TO THE PERIOD COVERED BY
THIS QUARTERLY REPORT;
3. BASED ON MY KNOWLEDGE, THE FINANCIAL STATEMENTS, AND OTHER FINANCIAL
INFORMATION INCLUDED IN THIS QUARTERLY REPORT, FAIRLY PRESENT IN ALL
MATERIAL RESPECTS THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND CASH
FLOWS OF THE REGISTRANT AS OF, AND FOR, THE PERIODS PRESENTED IN THIS
QUARTERLY REPORT;
4. THE REGISTRANT'S OTHER CERTIFYING OFFICERS AND I ARE RESPONSIBLE FOR
ESTABLISHING AND MAINTAINING DISCLOSURE CONTROLS AND PROCEDURES (AS DEFINED
IN EXCHANGE ACT RULES 13A-14 AND 15D-14) FOR THE REGISTRANT AND WE HAVE:
a) DESIGNED SUCH DISCLOSURE CONTROLS AND PROCEDURES TO ENSURE THAT
MATERIAL INFORMATION RELATING TO THE REGISTRANT, INCLUDING ITS
CONSOLIDATED SUBSIDIARIES, IS MADE KNOWN TO US BY OTHERS WITHIN THOSE
ENTITIES, PARTICULARLY DURING THE PERIOD IN WHICH THIS QUARTERLY REPORT IS
BEING PREPARED;
b) EVALUATED THE EFFECTIVENESS OF THE REGISTRANT'S DISCLOSURE CONTROLS AND
PROCEDURES AS OF A DATE WITHIN 90 DAYS PRIOR TO THE FILING DATE OF THIS
QUARTERLY REPORT (THE "EVALUATION DATE"); AND
c) PRESENTED IN THIS QUARTERLY REPORT OUR CONCLUSIONS ABOUT THE
EFFECTIVENESS OF THE DISCLOSURE CONTROLS AND PROCEDURES BASED ON OUR
EVALUATION AS OF THE EVALUATION DATE;
5. THE REGISTRANT'S OTHER CERTIFYING OFFICERS AND I HAVE DISCLOSED, BASED ON
OUR MOST RECENT EVALUATION, TO THE REGISTRANT'S AUDITORS AND THE AUDIT
COMMITTEE OF REGISTRANT'S BOARD OF DIRECTORS (OR PERSONS PERFORMING THE
EQUIVALENT FUNCTION):
A) ALL SIGNIFICANT DEFICIENCIES IN THE DESIGN OR OPERATION OF INTERNAL
CONTROLS WHICH COULD ADVERSELY AFFECT THE REGISTRANT'S ABILITY TO RECORD,
PROCESS, SUMMARIZE AND REPORT FINANCIAL DATA AND HAVE IDENTIFIED FOR THE
REGISTRANT'S AUDITORS ANY MATERIAL WEAKNESSES IN INTERNAL CONTROLS; AND
B) ANY FRAUD, WHETHER OR NOT MATERIAL, THAT INVOLVES MANAGEMENT OR OTHER
EMPLOYEES WHO HAVE A SIGNIFICANT ROLE IN THE REGISTRANT'S INTERNAL
CONTROLS; AND
6. THE REGISTRANT'S OTHER CERTIFYING OFFICERS AND I HAVE INDICATED IN THIS
QUARTERLY REPORT WHETHER OR NOT THERE WERE SIGNIFICANT CHANGES IN INTERNAL
CONTROLS OR IN OTHER FACTORS THAT COULD SIGNIFICANTLY AFFECT INTERNAL
CONTROLS SUBSEQUENT TO THE DATE OF OUR MOST RECENT EVALUATION, INCLUDING ANY
CORRECTIVE ACTIONS WITH REGARD TO SIGNIFICANT DEFICIENCIES AND MATERIAL
WEAKNESSES.
DATE: NOVEMBER 11, 2002
/S/ IRA G. BOOTS_____________
Ira G. Boots
President and Chief Executive Officer
27
I, James M. Kratochvil, certify that:
1. I have reviewed this quarterly report on Form 10-Q of BPC Holding
Corporation and Berry Plastics Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 11, 2002
/S/ JAMES M. KRATOCHVIL_________
James M. Kratochvil
Executive Vice President, Chief Financial Officer, Treasurer and Secretary
28