bpg10q7312015.htm


SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
FORM 10-Q
 
 [X]     Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the quarterly period ended June 27, 2015
or
 [   ]     Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
    
BPG Logo
 
Commission File Number 001-35672
BERRY PLASTICS GROUP, INC.
(Exact name of registrant as specified in its charter)
 
   
Delaware
20-5234618
(State or other jurisdiction  
of incorporation or organization)
 
(IRS employer  
identification number)
101 Oakley Street  
Evansville, Indiana
  
47710
(Address of principal executive offices)
(Zip code)
  
Registrant’s telephone number, including area code:  (812) 424-2904  
  
Securities registered pursuant to Section 12(b) of the Act:
 
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 such shorter period that the registrant was required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.  Yes [X ]  No [  ]  
  
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes [ X]  No [  ]  
  
Indicate by check mark whether the registrant is a large accelerated filer, accelerated filer, or non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):          
      Large accelerated filer [  X  ]           Accelerated filer [    ]              Non-accelerated filer [    ] Small reporting company [    ] 
  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).             Yes[    ]   No[ X ]  
 
Class
 
Outstanding at August 3, 2015
Common Stock, $.01 par value per share
 
119.8 million shares
 
 
 

 
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
 
This Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933  and Section 21E of the Securities Exchange Act of 1934 with respect to our financial condition, results of operations and business and our expectations or beliefs concerning future events.  The forward-looking statements include, in particular, statements about our plans, strategies and prospects under the heading "Management’s Discussion and Analysis of Financial Condition and Results of Operations".  You can identify forward-looking statements because they contain words such as “believes,” “expects,” “may,” “will,” “should,” “would,” “could,” “seeks,” “approximately,” “intends,” “plans,” “estimates,”  “outlook,” “anticipates” or “looking forward” or similar expressions that relate to our strategy, plans or intentions.  All statements we make relating to our estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates and financial results or to our expectations regarding future industry trends are forward-looking statements.  In addition, we, through our senior management, from time to time make forward-looking public statements concerning our expected future operations and performance and other developments.  These forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those that we expected.  We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions.  While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results.  All forward-looking statements are based upon information available to us on the date of this Form 10-Q. 
 
Readers should carefully review the factors discussed in our most recent Form 10-K in the section titled “Risk Factors” and other risk factors identified from time to time in our periodic filings with the Securities and Exchange Commission.
 
2

 
 
Berry Plastics Group, Inc.
Form 10-Q Index
For Quarterly Period Ended June 27, 2015  

   
Page No.
Part I.
Financial Information
 
Item 1.
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
Part II.
Other Information
 
Item 1.
Item 1A.
Item 6.
 
 
 
3

 
Part I.  Financial Information
Item 1.     Financial Statements
Berry Plastics Group, Inc.
Consolidated Statements of Income (Loss)
(Unaudited)
(in millions of dollars, except per share amounts)
 
   
Quarterly Period Ended
   
Three Quarterly Periods Ended
 
   
June 27,
2015
   
June 28,
2014
   
June 27,
2015
   
June 28,
2014
 
Net sales
  $ 1,241     $ 1,298     $ 3,685     $ 3,648  
Costs and expenses:
                               
Cost of goods sold
    1,003       1,089       3,037       3,076  
Selling, general and administrative
    92       85       266       244  
Amortization of intangibles
    22       26       70       77  
Restructuring and impairment charges
    3       15       11       28  
Operating income
    121       83       301       223  
Debt extinguishment
    94       33       94       35  
Other expense (income), net
    2       (2 )     2       (3 )
Interest expense, net
    47       56       152       168  
Income (loss) before income taxes
    (22 )     (4 )     53       23  
Income tax expense (benefit)
    (9 )     (19 )     15       (10 )
Consolidated net income (loss)
  $ (13 )   $ 15     $ 38     $ 33  
 
 
Net income (loss) per share:
                       
Basic
  $ (0.11 )   $ 0.13     $ 0.32     $ 0.28  
Diluted
    (0.11 )     0.12       0.31       0.27  
Outstanding weighted-average shares:
                               
Basic
    119.5       117.3       118.9       116.6  
Diluted
    119.5       121.5       123.7       120.8  
 
Berry Plastics Group, Inc.
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
(in millions of dollars) 
 
   
Quarterly Period Ended
   
Three Quarterly Periods Ended
 
   
June 27, 2015
   
June 28, 2014
   
June 27, 2015
   
June 28, 2014
 
Consolidated net income (loss)
  $ (13 )   $ 15     $ 38     $ 33  
Currency translation
    2       4       (32 )      
Interest rate hedge
    2       (10 )     (18 )     (6 )
Provision for income taxes related to other comprehensive income items
          3       6       1  
Comprehensive income (loss)
  $ (9 )   $ 12     $ (6 )   $ 28  
 
See notes to consolidated financial statements.
 
4

 
 
Berry Plastics Group, Inc.
Consolidated Balance Sheets
 (in millions of dollars)
   
June 27,
2015
   
September 27,
2014
 
Assets
 
(Unaudited)
       
Current assets:
           
Cash and cash equivalents
  $ 62     $ 129  
Accounts receivable (less allowance of $3) 
    473       491  
           Inventories:
               
Finished goods
    323       353  
Raw materials and supplies
    251       251  
      574       604  
Deferred income taxes
    181       166  
Prepaid expenses and other current assets
    38       42  
Total current assets
    1,328       1,432  
Property, plant, and equipment, net
    1,301       1,364  
Goodwill, intangible assets and deferred costs, net
    2,381       2,471  
Other assets
    1       1  
Total assets
  $ 5,011     $ 5,268  
 
Liabilities
               
 
Current liabilities:
               
Accounts payable
  $ 353     $ 395  
Accrued expenses and other current liabilities
    302       314  
Current portion of long-term debt
    39       58  
Total current liabilities
    694       767  
Long-term debt, less current portion
    3,669       3,860  
Deferred income taxes
    406       386  
Other long-term liabilities
    316       356  
Total liabilities
    5,085       5,369  
 
Redeemable non-controlling interest
    13       13  
                 
Stockholders’ equity (deficit)
               
                 
Common stock (119.5 and 118.0 shares issued, respectively)
    1       1  
Additional paid-in capital
    400       367  
Non-controlling interest
    3       3  
Accumulated deficit
    (404 )     (442 )
Accumulated other comprehensive loss
    (87 )     (43 )
Total stockholders’ equity (deficit)
    (87 )     (114 )
Total liabilities and stockholders’ equity (deficit)
  $ 5,011     $ 5,268  
 
See notes to consolidated financial statements.
 
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Berry Plastics Group, Inc.
Consolidated Statement of Changes in Stockholders’ Equity (Deficit)
For the Three Quarterly Periods Ended June 27, 2015 and June 28, 2014
(Unaudited)
(in millions of dollars)
 
   
Common Stock
   
Additional Paid-in Capital
   
Non-controlling Interest
   
Accumulated Other Comprehensive Loss
   
Accumulated Deficit
   
Total
 
Balance at September 28, 2013
  $ 1     $ 322     $ 3     $ (18 )   $ (504 )   $ (196 )
Proceeds from issuance of common stock
          13                         13  
Obligation under tax receivable agreement
          13                         13  
Stock compensation expense
          12                         12  
Consolidated net income
                                  33       33  
Interest rate hedge, net of tax
                      (5 )           (5 )
Balance at June 28, 2014
  $ 1     $ 360     $ 3     $ (23 )   $ (471 )   $ (130 )
Balance at September 27, 2014
  $ 1     $ 367     $ 3     $ (43 )   $ (442 )   $ (114 )
Proceeds from issuance of common stock
          16                         16  
Stock compensation expense
          17                         17  
Consolidated net income
                            38       38  
Interest rate hedge, net of tax
                      (12 )           (12 )
Currency translation
                      (32 )           (32 )
Balance at June 27, 2015
  $ 1     $ 400     $ 3     $ (87 )   $ (404 )   $ (87 )
 
See notes to consolidated financial statements.
 
6

 
Berry Plastics Group, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(in millions of dollars)
 
   
Three Quarterly Periods Ended
 
   
June 27,
2015
   
June 28,
2014
 
Cash Flows from Operating Activities:
           
Consolidated net income
  $ 38     $ 33  
Adjustments to reconcile net cash provided by operating activities:
               
Depreciation
    193       184  
Amortization of intangibles
    70       77  
Non-cash interest expense
    5       5  
Deferred income tax
    12       (15 )
Debt extinguishment
    94       35  
Stock compensation expense
    17       12  
Impairment of long-lived assets
    2       6  
Other non-cash items
    3        
Changes in operating assets and liabilities:
               
Accounts receivable, net
    10       (21 )
Inventories
    22       (35 )
Prepaid expenses and other assets
    (4 )     2  
                   Accounts payable and other liabilities
    (70 )     87  
Net cash provided by operating activities
    392       370  
 
Cash Flows from Investing Activities:
               
Additions to property, plant and equipment
    (124 )     (172 )
Proceeds from sale of assets
    18       5  
Acquisition of business, net of cash acquired
          (225 )
Net cash used in investing activities
    (106 )     (392 )
 
Cash Flows from Financing Activities:
               
Proceeds from long-term borrowings
    702       1,664  
Repayments on long-term borrowings
    (940 )     (1,675 )
Proceeds from issuance of common stock
    16       13  
Payment of tax receivable agreement
    (39 )     (32 )
Debt financing costs
    (87 )     (44 )
Net cash used in financing activities
    (348 )     (74 )
Effect of exchange rate changes on cash
    (5 )     (1 )
Net change in cash
    (67 )     (97 )
Cash and cash equivalents at beginning of period
    129       142  
Cash and cash equivalents at end of period
  $ 62     $ 45  
 
See notes to consolidated financial statements.
 
7

 
Berry Plastics Group, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
(tables in millions of dollars, except per share data)
1.  Basis of Presentation
 
The accompanying unaudited Consolidated Financial Statements of Berry Plastics Group, Inc. (“the Company”) have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) pursuant to the rules and regulations of the Securities and Exchange Commission for interim reporting. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included, and all subsequent events up to the time of the filing have been evaluated. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s most recent Form 10-K filed with the Securities and Exchange Commission.
 
2. Recently Issued Accounting Pronouncements
 
Revenue Recognition  
 
In May 2014, the Financial Accounting Standards Board (FASB) issued a final standard on revenue recognition. Under the new standard, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In order to do so, an entity would follow the five-step process for in-scope transactions: 1) identify the contract with a customer, 2) identify the separate performance obligations in the contract, 3) determine the transaction price, 4) allocate the transaction price to the separate performance obligations in the contract, and 5) recognize revenue when (or as) the entity satisfies a performance obligation. For public entities, the provisions of the new standard are effective for annual reporting periods beginning after December 15, 2017 and interim periods therein.  Early adoption for annual reporting periods beginning after December 15, 2016 is permitted. An entity can apply the new revenue standard retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application in retained earnings. There are areas within the standard that are currently under review and reconsideration by the FASB, which could lead to future updates to the standard. As the outcomes of this process could lead to changes to the standard, we are still in the process of determining our approach to the adoption of this new standard, and the anticipated impact to the consolidated financial statements.
 
Classification of Debt Issuance Costs
 
In April 2015, the FASB issued Accounting Standards Update No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. This standard amends existing guidance to require the presentation of debt issuance costs in the balance sheet as a deduction from the carrying amount of the related debt liability instead of a deferred charge. It is effective for annual reporting periods beginning after December 15, 2015, but early adoption is permitted. The Company expects this new guidance will reduce total assets and total long-term debt on its consolidated balance sheets by amounts classified as deferred costs, but does not expect this update to have any other effect on its consolidated financial statements.
 
3.  Acquisitions
 
Rexam Healthcare Containers and Closures
 
In June 2014, the Company acquired Rexam’s Healthcare Containers and Closures business (“C&C”) for a purchase price of $130 million, net of cash acquired. The C&C business produces bottles, closures, and specialty products for pharmaceutical and over-the-counter healthcare applications. The C&C acquisition 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 their fair values at the acquisition date. The acquired assets and assumed liabilities consisted of working capital of $29 million, property and equipment of $85 million, non-current deferred tax asset of $3 million, intangible assets of $9 million, goodwill of $7 million, and other long-term liabilities of $3 million.
 
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4.  Restructuring and Impairment Charges
 
The Company incurred restructuring costs related to severance, asset impairment, and facility exit costs of $3 million and $15 million for the quarterly periods ended and $11 million and $28 million for the three quarterly periods ended June 27, 2015 and June 28, 2014, respectively. The tables below set forth the significant components of the restructuring charges recognized, by segment:
 
   
Quarterly Period Ended
   
Three Quarterly Periods Ended
 
   
June 27,
2015
   
June 28,
2014
   
June 27,
2015
   
June 28,
2014
 
Rigid Open Top
  $ 1     $ 11     $ 3     $ 13  
Rigid Closed Top
                3       1  
Engineered Materials
    1       2       1       6  
Flexible Packaging
    1       2       4       8  
Consolidated
  $ 3     $ 15     $ 11     $ 28  
 
The table below sets forth the activity with respect to the restructuring accrual at June 27, 2015:
 
   
Severance and termination benefits
   
Facilities exit costs and other
   
 
Non-cash
   
 
Total
 
Balance at September 27, 2014
  $ 5     $ 8     $     $ 13  
Charges
    3       6       2       11  
Non-cash asset impairment
                (2 )     (2 )
Cash payments
    (5 )     (6 )           (11 )
Balance at June 27, 2015
  $ 3     $ 8     $     $ 11  
 
5.  Accrued Expenses, Other Current Liabilities and Other Long-Term Liabilities
 
The following table sets forth the totals included in Accrued expenses and other current liabilities on the Consolidated Balance Sheets:
 
   
June 27, 2015
   
September 27, 2014
 
Employee compensation, payroll and other taxes
  $ 90     $ 99  
Interest
    22       44  
Rebates
    49       50  
Restructuring
    11       13  
Tax receivable agreement obligation
    55       39  
Other
    75       69  
    $ 302     $ 314  
 
The following table sets forth the totals included in Other long-term liabilities on the Consolidated Balance Sheets:
 
   
June 27, 2015
   
September 27, 2014
 
Lease retirement obligation
  $ 32     $ 31  
Sale-lease back deferred gain
    28       30  
Pension liability
    42       45  
Tax receivable agreement obligation
    179       234  
Other
    35       16  
    $ 316     $ 356  
 
The Company made $39 million of payments related to the income tax receivable agreement ("TRA") in the first fiscal quarter of 2015, of which Apollo Global Management, LLC received $33 million. The TRA provides for the payment to TRA holders 85% of the amount of cash savings, if any, in U.S. federal, foreign, state and local income tax that are actually realized as a result of the utilization of our net operating losses attributable to periods prior to the initial public offering.
 
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6.  Long-Term Debt
 
Long-term debt consists of the following:
 
Maturity Date
 
June 27, 2015
   
September 27, 2014
 
Term loan
February 2020
  $ 1,372     $ 1,383  
Term loan
January 2021
    1,019       1,122  
Revolving line of credit
May 2020
    9        
51/8% Second Priority Senior Secured Notes
July 2023
    700        
51/2% Second Priority Senior Secured Notes
May 2022
    500       500  
9¾% Second Priority Senior Secured Notes
Retired
          800  
Debt discounts
      (24 )     (20 )
Capital leases and other
    Various
    132       133  
Total long-term debt
      3,708       3,918  
Current portion of long-term debt
      (39 )     (58 )
Long-term debt, less current portion
    $ 3,669     $ 3,860  
 
The Company’s senior secured credit facilities consist of $2.4 billion of term loans and a $650 million asset based revolving line of credit. The Company was in compliance with all covenants as of June 27, 2015.
 
In October 2014, the Company elected to make a voluntary one-time $100 million principal payment on the outstanding term loan using existing liquidity.
 
Revolving Line of Credit
 
In May 2015, the Company amended the credit agreement relating to its existing $650 million secured, revolving credit facility to extend the maturity date of the revolving credit facility from June 2016 to May 2020 and to reduce interest margins and certain commitment fees.
 
51/8% Second Priority Senior Secured Notes
In June 2015, the Company issued $700 million of 51/8% second priority senior secured notes due July 2023.  Interest on the 51/8% second priority senior secured notes is due semi-annually on January 15 and July 15.  Proceeds from the issuance and existing liquidity were used to satisfy and discharge all of the outstanding 9¾% second priority senior secured notes. The Company recognized a $94 million loss on extinguishment of debt, including $83 million of early tender and redemption costs and an $11 million write-off of deferred financing fees.
 
7.  Financial Instruments and Fair Value Measurements
 
As part of the overall risk management, the Company uses derivative instruments to reduce exposure to changes in interest rates attributed to the Company’s floating-rate borrowings. For those derivative instruments that are designated and qualify as hedging instruments, the Company must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation. To the extent hedging relationships are found to be effective, as determined by FASB guidance, changes in the fair value of the derivatives are offset by changes in the fair value of the related hedged item and recorded to Accumulated other comprehensive loss. Management believes hedge effectiveness is evaluated properly in preparation of the financial statements.
 
Cash Flow Hedging Strategy
 
For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative instrument is reported as a component of Accumulated other comprehensive loss and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings. The categorization of the framework used to price these derivative instruments is considered a Level 3, due to the subjective nature of the unobservable inputs used to determine the fair value.
 
10

 
In February 2013, the Company entered into an interest rate swap transaction to manage cash flow variability associated with $1 billion of outstanding variable rate term loan debt. The agreement swapped the greater of a three-month variable LIBOR contract or 1.00% for a fixed three-year rate of 2.355%, with an effective date in May 2016 and expiration in May 2019. In June 2013, the Company elected to settle this derivative instrument and received $16 million as a result of this settlement. The offset is included in Accumulated other comprehensive income and will be amortized to Interest expense from May 2016 through May 2019, the original term of the swap agreement.
 
In March 2014, the Company entered into an interest rate swap transaction to manage cash flow variability associated with $1 billion of outstanding variable rate term loan debt. The agreement swaps the greater of a three-month variable LIBOR contract or 1.00% for a fixed three-year rate of 2.59%, with an effective date in February 2016 and expiration in February 2019. The Company records changes in fair value in Accumulated other comprehensive income and Deferred income taxes.
 
Derivatives instruments
Balance Sheet Location
 
June 27,
 2015
   
September 27,
2014
 
Interest rate swap
Other long-term liabilities
  $ 21     $ 3  
 
Non-recurring Fair Value Measurements
 
The Company has certain assets that are measured at fair value on a non-recurring basis when impairment indicators are present. The assets are adjusted to fair value only when the carrying values exceed the fair values. The categorization of the framework used to price the assets is considered Level 3, due to the subjective nature of the unobservable inputs used to determine the fair value. These assets include primarily our definite lived and indefinite lived intangible assets, including Goodwill and our property plant and equipment. The Company reviews Goodwill and other indefinite lived assets for impairment as of the first day of the fourth fiscal quarter each year, and more frequently if impairment indicators exist. The Company determined Goodwill and other indefinite lived assets were not impaired in our annual fiscal 2014 assessment and no impairment indicators existed in the current quarter.
 
Included in the following table are the major categories of assets measured at fair value on a non-recurring basis as of June 27, 2015 and September 27, 2014, along with the impairment loss recognized on the fair value measurement during the period:
 
   
As of June 27, 2015
 
   
Level 1
   
Level 2
   
Level 3
   
Total
   
Impairment
 
Indefinite-lived trademarks
  $     $     $ 207     $ 207     $  
Goodwill
                1,654       1,654        
Definite lived intangible assets
                511       511        
Property, plant, and equipment
                1,301       1,301       2  
Total
  $     $     $ 3,673     $ 3,673     $ 2  
 
 
   
As of September 27, 2014
 
   
Level 1
   
Level 2
   
Level 3
   
Total
   
Impairment
 
Indefinite-lived trademarks
  $     $     $ 207     $ 207     $  
Goodwill
                1,659       1,659        
Definite lived intangible assets
                585       585        
Property, plant, and equipment
                1,364       1,364       7  
Total
  $     $     $ 3,815     $ 3,815     $ 7  
 
The Company’s financial instruments consist primarily of cash and cash equivalents, long-term debt, and capital lease obligations. The book value of our long-term indebtedness exceeded fair value by $24 million as of June 27, 2015. The Company’s long-term debt fair values were determined using Level 2 inputs as other significant observable inputs were not available.  
 
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8.  Income Taxes
 
A reconciliation of Income tax expense (benefit), computed at the federal statutory rate, to income tax expense (benefit), as provided for in the financial statements, is as follows:
 
   
Quarterly Period Ended
   
Three Quarterly Periods Ended
 
   
June 27, 2015
   
June 28, 2014
   
June 27, 2015
   
June 28, 2014
 
Income tax expense (benefit) computed at statutory rate
  $ (9 )   $ (2 )   $ 19     $ 8  
Research and development credits
          (18 )     (3 )     (18 )
Uncertain tax positions
                      (1 )
Change in valuation allowance
          1             1  
Other
                (1 )      
Income tax expense (benefit)
  $ (9 )   $ (19 )   $ 15     $ (10 )
 
9.  Operating Segments
 
The Company’s operations are organized into four reportable segments: Rigid Open Top, Rigid Closed Top, Engineered Materials, and Flexible Packaging. We have manufacturing and distribution centers in the United States, Canada, Mexico, Belgium, France, Australia, Germany, Brazil, Malaysia, India, China, and the Netherlands. The North American operation represents 95% of net sales, 96% of total long-lived assets, and 95% of the total assets. Selected information by reportable segment is presented in the following table: 
 
   
Quarterly Period Ended
   
Three Quarterly Periods Ended
 
   
June 27, 2015
   
June 28, 2014
   
June 27, 2015
   
June 28, 2014
 
Net sales:
                       
Rigid Open Top
  $ 276     $ 303     $ 784     $ 820  
Rigid Closed Top
    368       381       1,121       1,073  
Engineered Materials
    359       371       1,052       1,081  
Flexible Packaging
    238       243       728       674  
               Total net sales
  $ 1,241     $ 1,298     $ 3,685     $ 3,648  
Operating income :
                               
Rigid Open Top
  $ 26     $ 1     $ 51     $ 20  
Rigid Closed Top
    42       38       104       101  
Engineered Materials
    38       33       105       90  
Flexible Packaging
    15       11       41       12  
               Total operating income
  $ 121     $ 83     $ 301     $ 223  
Depreciation and amortization:
                               
Rigid Open Top
  $ 23     $ 23     $ 68     $ 70  
Rigid Closed Top
    32       33       99       93  
Engineered Materials
    17       19       52       56  
Flexible Packaging
    15       16       44       42  
               Total depreciation and amortization
  $ 87     $ 91     $ 263     $ 261  
 
 
12

 
 
   
June 27,
2015
   
September 27,
2014
 
Total assets:
           
Rigid Open Top
  $ 1,760     $ 1,808  
Rigid Closed Top
    1,850       1,966  
Engineered Materials
    674       722  
Flexible Packaging
    727       772  
Total assets
  $ 5,011     $ 5,268  
Goodwill:
               
Rigid Open Top
  $ 681     $ 681  
Rigid Closed Top
    825       827  
Engineered Materials
    69       71  
Flexible Packaging
    79       80  
                 Total goodwill
  $ 1,654     $ 1,659  
 
10.  Contingencies and Commitments
 
The Company is party to various legal proceedings involving routine claims which are incidental to the business.  Although the legal and financial liability with respect to such proceedings cannot be estimated with certainty, the Company believes that any ultimate liability would not be material to the business, financial condition, results of operations, or cash flows of the Company.
 
11.  Basic and Diluted Net Income (Loss) per Share
 
Basic net income (loss) per share is calculated by dividing the net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration for common stock equivalents. Diluted net income (loss) per share is computed by dividing the net income (loss) attributable to common stockholders by the weighted-average number of common share equivalents outstanding for the period determined using the treasury-stock method and the if-converted method. For purposes of this calculation, stock options are considered to be common stock equivalents and are only included in the calculation of diluted net income (loss) per share when their effect is dilutive.
 
The following tables and discussion provide a reconciliation of the numerator and denominator of the basic and diluted net income (loss) per share computations. The calculation below provides net income (loss) on both basic and diluted basis for the quarterly periods ended June 27, 2015 and June 28, 2014:
 
   
Quarterly Period Ended
   
Three Quarterly Periods Ended
 
(in millions, except per share amounts)
 
June 27, 2015
   
June 28, 2014
   
June 27, 2015
   
June 28, 2014
 
Numerator
                       
Consolidated net income (loss)
  $ (13 )   $ 15     $ 38     $ 33  
Denominator
                               
Weighted average common shares outstanding - basic
    119.5       117.3       118.9       116.6  
Dilutive shares
          4.2       4.8       4.2  
Weighted average common and common equivalent shares outstanding - diluted
    119.5       121.5       123.7       120.8  
                                 
Per common share income (loss)
                               
Basic
  $ ( 0.11 )   $ 0.13     $ 0.32     $ 0.28  
Diluted
  $ ( 0.11 )   $ 0.12     $ 0.31     $ 0.27  
 
The effect of outstanding stock options is not included in the calculation of diluted net loss per common share for the quarterly period ended June 27, 2015 as the effect of these options would be antidilutive to the net loss available to common shareholders.  Thus, the weighted average common equivalent shares used for purposes of computing diluted EPS are the same as those used to compute basic EPS for these periods.  Shares excluded from the quarterly period ended June 27, 2015 calculation, as the effect of their exercise into shares of our common stock would be antidilutive, were 4.9 million.
 
13

 
12.  Comprehensive Income (Loss)
 
Comprehensive income (loss) is comprised of Consolidated net income (loss) and Other comprehensive income (loss).  Other comprehensive losses include net unrealized gains or losses resulting from currency translations of foreign subsidiaries, changes in the value of our derivative instruments and adjustments to the pension liability.  
 
The balances related to each component of Other comprehensive income (loss) during the nine months ended June 27, 2015 were as follows:
   
Currency Translation
   
 
Defined Benefit Pension and Retiree Health Benefit Plans
   
 
 
 
Derivative Instruments
   
Accumulated Other Comprehensive Loss
 
Balance at September 27, 2014
  $ (36 )   $ (15 )   $ 8     $ (43 )
Other comprehensive loss
    (32 )           (18 )     (50 )
Tax expense
                6       6  
Balance at June 27, 2015
  $ (68 )   $ (15 )   $ (4 )   $ (87 )
 
13.  Guarantor and Non-Guarantor Financial Information  
 
Berry Plastics Corporation (“Issuer”) has notes outstanding which are fully, jointly, severally, and unconditionally guaranteed by substantially all of Berry’s domestic subsidiaries.  Separate narrative information or financial statements of the guarantor subsidiaries have not been included because they are 100% owned by the parent company and the guarantor subsidiaries unconditionally guarantee such debt on a joint and several basis.  A guarantee of a guarantor of the securities will terminate upon the following customary circumstances:  the sale of the capital stock of such guarantor if such sale complies with the indenture, the designation of such guarantor as an unrestricted subsidiary, the defeasance or discharge of the indenture, as a result of the holders of certain other indebtedness foreclosing on a pledge of the shares of a guarantor subsidiary or if such guarantor no longer guarantees certain other indebtedness of the issuer.  The guarantees are also limited as necessary to prevent them from constituting a fraudulent conveyance under applicable law and guarantees guaranteeing subordinated debt are subordinated to certain other of the Company’s debts.  Presented below is condensed consolidating financial information for the parent, issuer, guarantor subsidiaries and non-guarantor subsidiaries.  Our issuer and guarantor financial information includes all of our domestic operating subsidiaries, our non-guarantor subsidiaries include our foreign subsidiaries and BP Parallel, LLC. Berry Plastics Group, Inc. uses the equity method to account for its ownership in Berry Plastics Corporation in the Condensed Consolidating Supplemental Financial Statements.  Berry Plastics Corporation uses the equity method to account for its ownership in the guarantor and non-guarantor subsidiaries.  All consolidating entries are included in the eliminations column along with the elimination of intercompany balances.
Condensed Supplemental Consolidated Balance Sheet
   
June 27, 2015
 
   
Parent
   
Issuer
   
Guarantor
Subsidiaries
   
Non—
Guarantor
Subsidiaries
   
Eliminations
   
Total
 
Current assets
    181       99       837       211             1,328  
Intercompany receivable
          3,135             102       (3,237 )      
Property, plant, and equipment, net
          81       1,114       106             1,301  
Other assets
    106       1,458       2,172       106       (1,460 )     2,382  
Total assets
  $ 287     $ 4,773     $ 4,123     $ 525     $ (4,697 )   $ 5,011  
 
                                               
Current liabilities
    50       177       379       88             694  
Intercompany payable
    (274 )           3,511             (3,237 )      
Other long-term liabilities
    585       3,761       38       7             4,391  
Redeemable non-controlling interest
    13                   13       (13 )     13  
Stockholders’ equity (deficit)
    (87 )     835       195       417       (1,447 )     (87 )
Total liabilities and stockholders’ equity (deficit)
  $ 287     $ 4,773     $ 4,123     $ 525     $ (4,697 )   $ 5,011  
 
 
14

 
 
   
September 27, 2014
 
   
Parent
   
Issuer
   
Guarantor
Subsidiaries
   
Non—
Guarantor
Subsidiaries
   
Eliminations
   
Total
 
Current assets
    166       171       901       194             1,432  
Intercompany receivable
          3,343             87       (3,430 )      
Property, plant and equipment, net
          84       1,162       118             1,364  
Other assets
    69       1,357       2,227       125       (1,306 )     2,472  
Total assets
  $ 235     $ 4,955     $ 4,290     $ 524     $ (4,736 )   $ 5,268  
 
                                               
Current liabilities
    35       212       435       85             767  
Intercompany payable
    (319 )           3,749             (3,430 )      
Other long-term liabilities
    620       3,934       42       6             4,602  
Redeemable non-controlling interest
    13                   13       (13 )     13  
Stockholders’ equity (deficit)
    (114 )     809       64       420       (1,293 )     (114 )
Total liabilities and stockholders’ equity (deficit)
  $ 235     $ 4,955     $ 4,290     $ 524     $ (4,736 )   $ 5,268  
 
Condensed Supplemental Consolidated Statements of Operations
 
   
Quarterly Period Ended June 27, 2015
 
   
Parent
   
Issuer
   
Guarantor
Subsidiaries
   
Non-
Guarantor
Subsidiaries
   
Eliminations
   
Total
 
Net sales
  $     $ 155     $ 961     $ 125     $     $ 1,241  
Cost of goods sold
          121       773       109             1,003  
Selling, general and administrative
          17       63       12             92  
Amortization of intangibles
          2       18       2             22  
Restructuring and impairment charges
                3                   3  
Operating income
          15       104       2             121  
Debt extinguishment            94                         94  
Other expense (income), net
          (2)       3       1             2  
Interest expense, net
          6       37       4             47  
Equity in net income of subsidiaries
    22       (60 )                 38        
Income (loss) before income taxes
    (22 )     (23 )     64       (3 )     (38 )     (22 )
Income tax expense (benefit)
    (9 )     (10 )           1       9       (9 )
Consolidated net income (loss)
  $ (13 )   $ (13 )   $ 64     $ (4 )   $ (47 )   $ (13 )
Comprehensive net income (loss)
  $ (13 )   $ (11 )   $ 64     $ (2 )   $ (47 )   $ (9 )
 
   
Quarterly Period Ended June 28, 2014
 
   
Parent
   
Issuer
   
Guarantor
Subsidiaries
   
Non-
Guarantor
Subsidiaries
   
Eliminations
   
Total
 
Net sales
  $     $ 165     $ 1,019     $ 114     $     $ 1,298  
Cost of goods sold
          145       854       90             1,089  
Selling, general and administrative
          13       62       10             85  
Amortization of intangibles
          3       21       2             26  
Restructuring and impairment charges
                15                   15  
Operating income
          4       67       12             83  
Debt extinguishment
          33                         33  
Other income, net
                (2 )                 (2 )
Interest expense, net
    10       7       43       (35 )     31       56  
Equity in net income of subsidiaries
    (6 )     (73 )                 79        
Income (loss) before income taxes
    (4 )     37       26       47       (110 )     (4 )
Income tax expense (benefit)
    (19 )     (7 )           1       6       (19 )
Consolidated net income (loss)
  $ 15     $ 44     $ 26     $ 46     $ (116 )   $ 15  
Comprehensive net income (loss)
  $ 15     $ 39     $ 26     $ 48     $ (116 )   $ 12  
 
 
15

 
   
Three Quarterly Periods Ended June 27, 2015
 
   
Parent
   
Issuer
   
Guarantor
Subsidiaries
   
Non-
Guarantor
Subsidiaries
   
Eliminations
   
Total
 
Net sales
  $     $ 464     $ 2,871     $ 350     $     $ 3,685  
Cost of goods sold
          394       2,366       277             3,037  
Selling, general and administrative
          50       183       33             266  
Amortization of intangibles
          6       58       6             70  
Restructuring and impairment charges
                11                   11  
Operating income
          14       253       34             301  
Debt extinguishment                          94        —        —         —         94  
Other expense (income), net
          (1)       2       1             2  
Interest expense, net
          19       119       14             152  
Equity in net income of subsidiaries
    (53 )     (148 )                 201        
Income (loss) before income taxes
    53       50       132       19       (201 )     53  
Income tax expense (benefit)
    15       12             3       (15 )     15  
Consolidated net income (loss)
  $ 38     $ 38     $ 132     $ 16     $ (186 )   $ 38  
Comprehensive net income (loss)
  $ 38     $ 26     $ 132     $ (16 )   $ (186 )   $ (6 )
 
Consolidating Statement of Cash Flows
                                   
Cash Flow from Operating Activities
  $     $ (35 )   $ 407     $ 20     $     $ 392  
Cash Flow from Investing Activities
                                               
Additions to  property, plant, and equipment
          (11 )     (110 )     (3 )           (124 )
Proceeds from sale of assets
                13       5             18  
(Contributions) distributions to/from subsidiaries
    (16 )     16                          
Intercompany advances (repayments)
          282                   (282 )      
Acquisition of business, net of cash acquired
                                   
Net cash from investing activities
    (16 )     288       (97 )     2       (282 )     (106 )
                                                 
Cash Flow from Financing Activities
                                               
Proceeds from long-term debt
          702                         702  
Proceeds from issuance of common stock
    16                               16  
Payment of tax receivable agreement
    (39 )                             (39 )
Repayments on long-term borrowings
          (937 )           (3 )           (940 )
Debt financing costs
          (87 )                       (87 )
Changes in intercompany balances
    39             (321 )           282        
Net cash from financing activities
    16       (322 )     (321 )     (3 )     282       (348 )