bpg10q.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 January 2, 2016
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File Number 001-35672
BERRY PLASTICS GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware
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20-5234618
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(State or other jurisdiction
of incorporation or organization)
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(IRS employer
identification number)
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101 Oakley Street
Evansville, Indiana
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47710
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(Address of principal executive offices)
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(Zip code)
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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
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Outstanding at February 11, 2016
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Common Stock, $.01 par value per share
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120.5 million shares
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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, as amended, 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, intentions, our financial condition, or our recent acquisition of AVINTIV Inc. (“Avintiv”) and integration thereof. 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.
Berry Plastics Group, Inc.
Form 10-Q Index
For Quarterly Period Ended January 2, 2016
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Page No.
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Part I.
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Financial Information
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Item 1
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Financial Statements
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4 |
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5 |
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6 |
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7 |
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8 |
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Item 2
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20 |
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Item 3
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26 |
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Item 4
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27 |
Part II
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Other Information
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Item 1
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27 |
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Item 1A
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27 |
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Item 6
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29 |
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30 |
Part I. Financial Information
Item 1. Financial Statements
Berry Plastics Group, Inc.
Consolidated Statements of Income
(Unaudited)
(in millions of dollars, except per share amounts)
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Net sales
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$ |
1,612 |
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$ |
1,220 |
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Costs and expenses:
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Cost of goods sold
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1,320 |
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1,037 |
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Selling, general and administrative
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154 |
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85 |
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Amortization of intangibles
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36 |
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25 |
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Restructuring and impairment charges
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16 |
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45 |
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Operating income
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86 |
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68 |
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Other expense (income), net
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4 |
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(1 |
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Interest expense, net
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75 |
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53 |
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Income before income taxes
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7 |
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16 |
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Income tax expense
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3 |
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3 |
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Net income
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$ |
4 |
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$ |
13 |
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Net income per share:
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Basic
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$ |
0.03 |
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$ |
0.11 |
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Diluted
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0.03 |
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0.11 |
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Outstanding weighted-average shares:
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Basic
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120.1 |
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118.2 |
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Diluted
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124.9 |
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122.9 |
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Berry Plastics Group, Inc.
(Unaudited)
(in millions of dollars)
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Quarterly Period Ended
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Net income
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$ |
4 |
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$ |
13 |
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Currency translation
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(29 |
) |
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(14 |
) |
Interest rate hedges
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4 |
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(7 |
) |
Provision for income taxes related to other comprehensive income items
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(1 |
) |
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2 |
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Comprehensive income (loss)
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$ |
(22 |
) |
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$ |
(6 |
) |
See notes to consolidated financial statements.
Berry Plastics Group, Inc.
(in millions of dollars)
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January 2,
2016
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September 26, 2015
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Assets
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(Unaudited)
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Current assets:
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Cash and cash equivalents
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$ |
282 |
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$ |
228 |
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Accounts receivable (less allowance of $9 and $3, respectively)
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625 |
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434 |
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Inventories:
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Finished goods
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391 |
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309 |
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Raw materials and supplies
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290 |
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213 |
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681 |
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522 |
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Deferred income taxes
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— |
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162 |
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Prepaid expenses and other current assets
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104 |
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37 |
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Total current assets
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1,692 |
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1,383 |
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Property, plant, and equipment, net
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2,297 |
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1,294 |
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Goodwill, intangible assets and deferred costs, net
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3,701 |
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2,349 |
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Other assets
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20 |
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2 |
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Total assets
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$ |
7,710 |
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$ |
5,028 |
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Liabilities
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Current liabilities:
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Accounts payable
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$ |
510 |
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$ |
330 |
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Accrued expenses and other current liabilities
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454 |
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338 |
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Current portion of long-term debt
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82 |
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37 |
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Total current liabilities
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1,046 |
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705 |
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Long-term debt, less current portion
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6,066 |
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3,648 |
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Deferred income taxes
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333 |
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387 |
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Other long-term liabilities
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332 |
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341 |
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Total liabilities
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7,777 |
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5,081 |
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Redeemable non-controlling interest
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12 |
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12 |
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Stockholders’ equity (deficit)
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Common stock (120.4 and 119.9 shares issued, respectively)
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1 |
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1 |
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Additional paid-in capital
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414 |
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406 |
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Non-controlling interest
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3 |
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3 |
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Accumulated deficit
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(352 |
) |
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(356 |
) |
Accumulated other comprehensive loss
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(145 |
) |
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(119 |
) |
Total stockholders’ equity (deficit)
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(79 |
) |
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(65 |
) |
Total liabilities and stockholders’ equity (deficit)
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$ |
7,710 |
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$ |
5,028 |
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See notes to consolidated financial statements.
Berry Plastics Group, Inc.
For the Quarterly Period Ended January 2, 2016 and December 27, 2014
(Unaudited)
(in millions of dollars)
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Common Stock
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Additional Paid-in Capital
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Non-controlling Interest
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Accumulated Other Comprehensive Loss
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Accumulated Deficit
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Total
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Balance at September 27, 2014
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$ |
1 |
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$ |
367 |
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$ |
3 |
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$ |
(43 |
) |
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$ |
(442 |
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$ |
(114 |
) |
Proceeds from issuance of common stock
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— |
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7 |
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— |
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— |
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— |
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7 |
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Stock compensation expense
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— |
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7 |
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— |
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— |
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— |
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7 |
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Net income
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— |
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— |
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— |
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— |
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13 |
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13 |
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Interest rate hedge, net of tax
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— |
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— |
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|
— |
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(5 |
) |
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— |
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(5 |
) |
Currency translation
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— |
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— |
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— |
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(14 |
) |
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— |
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(14 |
) |
Balance at December 27, 2014
|
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$ |
1 |
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|
$ |
381 |
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$ |
3 |
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|
$ |
(62 |
) |
|
$ |
(429 |
) |
|
$ |
(106 |
) |
Balance at September 26, 2015
|
|
$ |
1 |
|
|
$ |
406 |
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$ |
3 |
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|
$ |
(119 |
) |
|
$ |
(356 |
) |
|
$ |
(65 |
) |
Proceeds from issuance of common stock
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— |
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7 |
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— |
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— |
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|
— |
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7 |
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Stock compensation expense
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|
— |
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4 |
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— |
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— |
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— |
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4 |
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Purchase of non-controlling interest
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— |
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(3 |
) |
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— |
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— |
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— |
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(3 |
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Net income
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|
— |
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— |
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— |
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— |
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4 |
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4 |
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Interest rate hedge, net of tax
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|
— |
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|
— |
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|
|
— |
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3 |
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|
— |
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|
3 |
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Currency translation
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|
— |
|
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|
— |
|
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|
— |
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(29 |
) |
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— |
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(29 |
) |
Balance at January 2, 2016
|
|
$ |
1 |
|
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$ |
414 |
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$ |
3 |
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|
$ |
(145 |
) |
|
$ |
(352 |
) |
|
$ |
(79 |
) |
See notes to consolidated financial statements.
Berry Plastics Group, Inc.
(Unaudited)
(in millions of dollars)
|
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Cash Flows from Operating Activities:
|
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Net income
|
|
$ |
4 |
|
|
$ |
13 |
|
Adjustments to reconcile net cash provided by operating activities:
|
|
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Depreciation
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|
103 |
|
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66 |
|
Amortization of intangibles
|
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36 |
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25 |
|
Non-cash interest expense
|
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|
3 |
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|
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2 |
|
Deferred income tax
|
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(8 |
) |
|
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3 |
|
Stock compensation expense
|
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|
4 |
|
|
|
7 |
|
Impairment of long-lived assets
|
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|
— |
|
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|
2 |
|
Other non-cash items
|
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|
7 |
|
|
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(2 |
) |
Changes in working capital
|
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|
37 |
|
|
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(14 |
) |
Changes in other assets and liabilities
|
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|
5 |
|
|
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(2 |
) |
Net cash from operating activities
|
|
|
191 |
|
|
|
100 |
|
Cash Flows from Investing Activities:
|
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|
|
|
|
|
|
|
Additions to property, plant and equipment
|
|
|
(93 |
) |
|
|
(35 |
) |
Proceeds from sale of assets
|
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|
4 |
|
|
|
10 |
|
Acquisition of businesses, net of cash acquired
|
|
|
(2,286 |
) |
|
|
— |
|
Net cash from investing activities
|
|
|
(2,375 |
) |
|
|
(25 |
) |
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
Proceeds from long-term borrowings
|
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|
2,492 |
|
|
|
— |
|
Repayments on long-term borrowings
|
|
|
(100 |
) |
|
|
(116 |
) |
Proceeds from issuance of common stock
|
|
|
7 |
|
|
|
7 |
|
Payment of tax receivable agreement
|
|
|
(57 |
) |
|
|
(39 |
) |
Debt financing costs
|
|
|
(36 |
) |
|
|
— |
|
Purchase of non-controlling interest
|
|
|
(66 |
) |
|
|
— |
|
Net cash from financing activities
|
|
|
2,240 |
|
|
|
(148 |
) |
Effect of exchange rate changes on cash
|
|
|
(2 |
) |
|
|
(3 |
) |
Net change in cash
|
|
|
54 |
|
|
|
(76 |
) |
Cash and cash equivalents at beginning of period
|
|
|
228 |
|
|
|
129 |
|
Cash and cash equivalents at end of period
|
|
$ |
282 |
|
|
$ |
53 |
|
See notes to consolidated financial statements.
Berry Plastics Group, Inc.
(Unaudited)
(tables in millions of dollars, except per share data)
1. Basis of Presentation
The accompanying unaudited Condensed 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 preparing financial statements in conformity with GAAP, we must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures at the date of the financial statements and during the reporting period. Actual results could differ from those estimates. 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. Accounting Pronouncements
Changes to GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates to the FASB’s Accounting Standards Codification. During the first fiscal quarter of 2016, with the exception of the below, there have been no developments to the recently adopted accounting pronouncements from those disclosed in the Company’s 2015 Annual Report on Form 10-K that are considered to have a material impact on our unaudited consolidated financial statements.
Inventory
In July 2015, the FASB issued ASU 2015-11, simplifying the Measurement of Inventory to simplify the guidance on the subsequent measurement of inventory, excluding inventory measured using last-in, first out or the retail inventory method. Under the new standard, inventory should be at the lower of cost and net realizable value. The new accounting guidance is effective for interim and annual periods beginning after December 15, 2016 with early adoption permitted. The Company has elected to early adopt this guidance, and its effect did not have a material impact on our financial statements.
Business Combinations
In September 2015, the FASB issued ASU 2015-16, Business Combinations (Topic 805)- Simplifying the accounting for Measurement-Period Adjustments, which requires that the cumulative impact of a measurement period adjustment (including the impact on prior periods) be recognized in the reporting period in which the adjustment is identified. Entities should present separately on the face of the income statement or disclose in the footnotes the portion of the measurement period adjustment recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment had been recognized as of the acquisition date. The new guidance is effective for interim and annual periods beginning after December 15, 2015 with early adoption permitted. The Company has elected to early adopt this guidance, and will consider the impact of such guidance on our recording of the AVINTIV, Inc. business combination.
Income Taxes
In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes”, which simplifies the presentation of deferred income taxes. This update requires that deferred tax assets and liabilities be classified as non-current in a statement of financial position. The update is effective for financial periods beginning after December 15, 2017; however, early application is permitted. The Company adopted this standard in the first quarter of fiscal year 2016, on a prospective basis, resulting in a $175 million reclassification of our net current deferred tax asset to the net non-current deferred tax liabilities on our Consolidated Balance Sheet.
3. Acquisition
AVINTIV Inc.
In October 2015, the Company acquired 100% of the capital stock of AVINTIV Inc. (“Avintiv”) for a purchase price of $2.26 billion, net of $195 million of cash acquired, which is preliminary and subject to adjustment. Avintiv is one of the world’s leading developers, producers, and marketers of nonwoven specialty materials used in hygiene, infection prevention, personal care, and high-performance solutions. The acquired business is operated in the Health, Hygiene & Specialties reporting segment. To finance the purchase, the Company issued $400 million aggregate principal amount of 6.0% second priority senior secured notes due 2022 and entered into an incremental assumption agreement to increase the commitments under the Company’s existing term loan credit agreement by $2.1 billion due 2022.
The 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 preliminary fair values at the acquisition date. The results of Avintiv have been included in the consolidated results of the Company since the date of the acquisition. Avintiv had net sales of $437 million for the first fiscal quarter of 2016. The Company has not finalized the allocation of the purchase price to the fair value of fixed assets, intangibles, deferred income taxes, or debt and is continuing to review all of the working capital acquired and uncertain tax positions. The Company does not expect Goodwill resulting from the acquisition to be deductible for tax purposes. The following table summarizes the preliminary allocation of purchase price and the estimated fair values of the assets acquired and liabilities assumed at the date of the acquisition:
Working capital (a)
|
|
$ |
190 |
|
Property and equipment
|
|
|
986 |
|
Intangible assets
|
|
|
586 |
|
Goodwill
|
|
|
803 |
|
Historical Avintiv debt assumed
|
|
|
(53 |
) |
Non-controlling interest
|
|
|
(63 |
) |
Deferred purchase price
|
|
|
(31 |
) |
Other assets and long-term liabilities
|
|
|
(158 |
) |
(a) Includes a $7 million step up of inventory to fair value
|
|
The deferred purchase price relates to certain unaccrued tax claims of Companhia Providência Indústria e Comércio (“Providência”) at the time Providência was acquired by Avintiv. If the claims are resolved in the Company's favor, the deferred purchase price will be paid to the legacy Providência shareholders. However, if the Company or Providência incur actual tax liability in respect to these claims, the amount of deferred purchase price will be reduced by the amount of such actual tax liability. The Company will be responsible for any actual tax liability in excess of the deferred purchase price and the cash consideration deposited into escrow.
Unaudited pro forma net sales were $1.7 billion and unaudited pro forma net losses were $7 million for the three-month period ending December 27, 2014. The unaudited pro forma net sales and net loss assume that the Avintiv acquisition had occurred as of the beginning of the period.
The unaudited pro forma information presented above is for informational purposes only and is not necessarily indicative of the operating results that would have occurred had the Avintiv acquisition been consummated at the beginning of the period, nor is it necessarily indicative of future operating results. Further, the information reflects only pro forma adjustments for additional interest expense, depreciation, and amortization, net of the applicable income tax effects.
4. Accounts Receivable Factoring Agreements
A number of the Company's foreign subsidiaries in Brazil, Colombia, France, Italy, Mexico, Netherlands, Spain, and China have entered into factoring agreements to sell certain receivables to unrelated third-party financial institutions. The Company accounts for these transactions in accordance with ASC 860, "Transfers and Servicing" ("ASC 860"). ASC 860 allows for the ownership transfer of accounts receivable to qualify for sale treatment when the appropriate criteria is met, which permits the Company to present the balances sold under the program to be excluded from Accounts receivable, net on the Consolidated Balance Sheets. Receivables are considered sold when (i) they are transferred beyond the reach of the Company and its creditors, (ii) the purchaser has the right to pledge or exchange the receivables, and (iii) the Company has surrendered control over the transferred receivables. In addition, the Company provides no other forms of continued financial support to the purchaser of the receivables once the receivables are sold. The table below summarizes the total amount of accounts receivable on the Consolidated Balance Sheets, sold under these factoring arrangements as of the end of the first fiscal quarter:
|
|
January 2, 2016
|
|
|
September 26, 2015
|
|
Trade receivables sold to financial institutions
|
|
$ |
45 |
|
|
$ |
- |
|
Net amounts advanced from financial institutions
|
|
|
(40 |
) |
|
|
- |
|
Amounts due from financial institutions
|
|
$ |
5 |
|
|
$ |
- |
|
In addition to the programs described above, the Company has a U.S. based program where certain U.S. based receivables are sold to unrelated third-party financial institutions. There were no amounts outstanding from the financial institutions related to U.S. based programs at January 2, 2016.
The fees associated with transfer of receivables for all programs were not material for the periods ended January 2, 2016 or December 27, 2014.
5. Restructuring and Impairment Charges
The Company incurred restructuring costs related to severance, asset impairment, and facility exit costs of $16 million and $5 million for the quarterly period ended January 2, 2016 and December 27, 2014, respectively. The costs incurred in the quarter relate primarily to severance charges associated with the integration of the Avintiv acquisition and the closure of a manufacturing facility. The tables below set forth the significant components of the restructuring charges recognized, by segment:
|
|
|
|
|
|
|
|
|
|
|
Consumer Packaging
|
|
$ |
3 |
|
|
$ |
2 |
|
Health, Hygiene, & Specialties
|
|
|
12 |
|
|
|
3 |
|
Engineered Materials
|
|
|
1 |
|
|
|
- |
|
Consolidated
|
|
$ |
16 |
|
|
$ |
5 |
|
The table below sets forth the activity with respect to the restructuring accrual at January 2, 2016:
|
|
Severance and termination benefits
|
|
|
Facilities exit
costs and other
|
|
|
|
|
Balance at September 26, 2015
|
|
$ |
2 |
|
|
$ |
8 |
|
|
$ |
10 |
|
Charges
|
|
|
14 |
|
|
|
2 |
|
|
|
16 |
|
Cash payments
|
|
|
(1 |
) |
|
|
(2 |
) |
|
|
(3 |
) |
Balance at January 2, 2016
|
|
$ |
15 |
|
|
$ |
8 |
|
|
$ |
23 |
|
6. 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:
|
|
|
|
|
|
|
Employee compensation, payroll and other
|
|
$ |
106 |
|
|
$ |
95 |
|
Interest
|
|
|
40 |
|
|
|
38 |
|
Rebates
|
|
|
62 |
|
|
|
53 |
|
Restructuring
|
|
|
23 |
|
|
|
10 |
|
Accrued taxes
|
|
|
46 |
|
|
|
20 |
|
Tax receivable agreement obligation
|
|
|
77 |
|
|
|
57 |
|
Accrued operating expenses
|
|
|
100 |
|
|
|
65 |
|
|
|
$ |
454 |
|
|
$ |
338 |
|
The following table sets forth the totals included in Other long-term liabilities on the Consolidated Balance Sheets:
|
|
|
|
|
|
|
Lease retirement obligation
|
|
$ |
33 |
|
|
$ |
32 |
|
Sale-lease back deferred gain
|
|
|
27 |
|
|
|
28 |
|
Pension liability
|
|
|
76 |
|
|
|
57 |
|
Deferred purchase price
|
|
|
32 |
|
|
|
— |
|
Tax receivable agreement obligation
|
|
|
98 |
|
|
|
175 |
|
Interest rate swaps
|
|
|
32 |
|
|
|
36 |
|
Other
|
|
|
34 |
|
|
|
13 |
|
|
|
$ |
332 |
|
|
$ |
341 |
|
The Company made $57 million of payments related to the income tax receivable agreement ("TRA") in the first fiscal quarter of 2016, of which Apollo received $46 million. The TRA provides for an annual payment to TRA holders at 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.
7. Long-Term Debt
Long-term debt consists of the following:
|
|
|
|
|
|
|
|
Term loan
|
February 2020
|
|
$ |
1,362 |
|
|
$ |
1,369 |
|
Term loan
|
January 2021
|
|
|
1,019 |
|
|
|
1,019 |
|
Term loan
|
October 2022
|
|
|
2,045 |
|
|
|
— |
|
Revolving line of credit
|
May 2020
|
|
|
— |
|
|
|
— |
|
51/8% Second Priority Senior Secured Notes
|
July 2023
|
|
|
700 |
|
|
|
700 |
|
51/2% Second Priority Senior Secured Notes
|
May 2022
|
|
|
500 |
|
|
|
500 |
|
6% Second Priority Senior Secured Notes
|
October 2022
|
|
|
400 |
|
|
|
— |
|
Debt discounts and deferred fees
|
|
|
|
(72 |
) |
|
|
(29 |
) |
Capital leases and other
|
Various
|
|
|
194 |
|
|
|
126 |
|
Total long-term debt
|
|
|
|
6,148 |
|
|
|
3,685 |
|
Current portion of long-term debt
|
|
|
|
(82 |
) |
|
|
(37 |
) |
Long-term debt, less current portion
|
|
|
$ |
6,066 |
|
|
$ |
3,648 |
|
Term Loan
In October 2015, the Company entered into an incremental assumption agreement to increase the commitments under the existing term loan credit agreement by $2.1 billion. The incremental term loan bears interest at LIBOR plus 3.00% per annum with a LIBOR floor of 1.00%, matures in October 2022 and is subject to customary amortization. The proceeds from the incremental term loan, in addition to the 6% Second Priority Senior Secured Notes, were used to finance the Avintiv acquisition. The Company recognized $11 million of debt discount and $30 million of deferred financing fees related to this assumption agreement that will be amortized to Interest expense through maturity. Debt discounts and deferred financing fees are presented net of Long-term debt, less current portion on the Consolidated Balance Sheet.
6% Second Priority Senior Secured Notes
In October 2015, the Company issued $400 million of 6% second priority senior secured notes due October 2022. Interest on these notes is due semi-annually in April and October. The proceeds from these notes, in addition to the incremental term loan, were used to finance the Avintiv acquisition. The Company recognized $5 million of deferred financing fees related to this debt issuance that will be amortized to Interest expense through maturity.
8. Financial Instruments and Fair Value Measurements
In the normal course of business, the Company is exposed to certain risks arising from business operations and economic factors. The Company may use derivative financial instruments to help manage market risk and reduce the exposure to fluctuations in interest rates and foreign currencies. These financial instruments are not used for trading or other speculative purposes. 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.
Foreign Currency Forward Contracts Not Designated as Hedges
The primary purposes of our foreign currency hedging activities is to manage the potential changes in value associated with the changes in foreign currencies related to foreign currency-denominated interest-bearing intercompany loans. The changes in fair value of these derivative contracts are recognized in other income, net, on our consolidated statements of operations and are largely offset by the remeasurement of the underlying intercompany loan. These contracts are entered into and settled within the given reporting period.
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.
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
|
|
|
|
|
|
|
|
Interest rate swap
|
Other long-term liabilities
|
|
$ |
32 |
|
|
$ |
36 |
|
The Fair Value Measurements and Disclosures section of the ASC defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, and establishes a framework for measuring fair value. This section also establishes a three-level hierarchy (Level 1, 2, 3) for fair value measurements based upon the observability of inputs to the valuation of an asset or liability as of the measurement date. This section also requires the consideration of the counterparty’s or the Company’s nonperformance risk when assessing fair value.
The Company’s interest rate swap fair values were determined using Level 2 inputs as other observable inputs were not available.
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 2015 assessment and as a result of the segment reorganization that occurred during the quarter, the Company conducted the qualitative assessment and determined it was more likely than not that the fair value of each reporting units exceeded the carrying amount as of the measurement date. No further impairment indicators were identified in the quarter.
Included in the following table are the major categories of assets measured at fair value on a non-recurring basis as of January 2, 2016 and September 26, 2015, along with the impairment loss recognized on the fair value measurement during the period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indefinite-lived trademarks
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
207 |
|
|
$ |
207 |
|
|
$ |
— |
|
Goodwill
|
|
|
— |
|
|
|
— |
|
|
|
2,459 |
|
|
|
2,459 |
|
|
|
— |
|
Definite lived intangible assets
|
|
|
— |
|
|
|
— |
|
|
|
1,031 |
|
|
|
1,031 |
|
|
|
— |
|
Property, plant, and equipment
|
|
|
— |
|
|
|
— |
|
|
|
2,297 |
|
|
|
2,297 |
|
|
|
— |
|
Total
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
5,994 |
|
|
$ |
5,994 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indefinite-lived trademarks
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
207 |
|
|
$ |
207 |
|
|
$ |
— |
|
Goodwill
|
|
|
— |
|
|
|
— |
|
|
|
1,652 |
|
|
|
1,652 |
|
|
|
— |
|
Definite lived intangible assets
|
|
|
— |
|
|
|
— |
|
|
|
486 |
|
|
|
486 |
|
|
|
— |
|
Property, plant, and equipment
|
|
|
— |
|
|
|
— |
|
|
|
1,294 |
|
|
|
1,294 |
|
|
|
2 |
|
Total
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
3,639 |
|
|
$ |
3,639 |
|
|
$ |
2 |
|
The Company’s financial instruments consist primarily of cash and cash equivalents, long-term debt, and capital lease obligations. The fair value of our marketable long-term indebtedness exceeded book value by $60 million as of January 2, 2016. The Company’s long-term debt fair values were determined using Level 2 inputs as other significant observable inputs were not available.
9. Income Taxes
The Company’s effective tax rate was 51% and 21% for the quarterly period ended January 2, 2016 and December 27, 2014, respectively. Income tax expense in the quarterly period ended January 2, 2016 was higher than our statutory rate was primarily due to valuation allowances recorded in foreign and state jurisdictions and non-deductible transaction costs.
10. Operating Segments
In November 2015 the Company reorganized into three operating segments: Health, Hygiene & Specialties, Consumer Packaging, and Engineered Materials. The new structure is designed to better align us with our customers, provide improved service, drive future growth and to facilitate future cost saving synergies. Selected information by reportable segment is presented in the following tables, with prior period amounts recast to conform to the new structure:
|
|
|
|
|
|
|
|
|
|
|
Net sales:
|
|
|
|
|
|
|
Consumer Packaging
|
|
$ |
683 |
|
|
$ |
712 |
|
Health, Hygiene, & Specialties
|
|
|
564 |
|
|
|
129 |
|
Engineered Materials
|
|
|
365 |
|
|
|
379 |
|
Total net sales
|
|
$ |
1,612 |
|
|
$ |
1,220 |
|
Operating income:
|
|
|
|
|
|
|
|
|
Consumer Packaging
|
|
$ |
43 |
|
|
$ |
30 |
|
Health, Hygiene, & Specialties
|
|
|
5 |
|
|
|
7 |
|
Engineered Materials
|
|
|
38 |
|
|
|
31 |
|
Total operating income
|
|
$ |
86 |
|
|
$ |
68 |
|
Depreciation and amortization:
|
|
|
|
|
|
|
|
|
Consumer Packaging
|
|
$ |
67 |
|
|
$ |
63 |
|
Health, Hygiene, & Specialties
|
|
|
54 |
|
|
|
7 |
|
Engineered Materials
|
|
|
18 |
|
|
|
21 |
|
Total depreciation and amortization
|
|
$ |
139 |
|
|
$ |
91 |
|
|
|
|
|
|
|
|
Total assets:
|
|
|
|
|
|
|
Consumer Packaging
|
|
$ |
3,617 |
|
|
$ |
3,832 |
|
Health, Hygiene, & Specialties
|
|
|
3,370 |
|
|
|
385 |
|
Engineered Materials
|
|
|
723 |
|
|
|
811 |
|
Total assets
|
|
$ |
7,710 |
|
|
$ |
5,028 |
|
Goodwill:
|
|
|
|
|
|
|
|
|
Consumer Packaging
|
|
$ |
1,519 |
|
|
$ |
1,520 |
|
Health, Hygiene, & Specialties
|
|
|
857 |
|
|
|
48 |
|
Engineered Materials
|
|
|
83 |
|
|
|
84 |
|
Total goodwill
|
|
$ |
2,459 |
|
|
$ |
1,652 |
|
Selected information by geography is presented in the following tables:
|
|
|
|
|
|
|
|
|
|
|
Net sales:
|
|
|
|
|
|
|
North America
|
|
$ |
1,307 |
|
|
$ |
1,168 |
|
South America
|
|
|
79 |
|
|
|
2 |
|
Europe
|
|
|
157 |
|
|
|
32 |
|
Asia
|
|
|
69 |
|
|
|
18 |
|
Total net sales
|
|
$ |
1,612 |
|
|
$ |
1,220 |
|
|
|
|
|
|
|
|
Long-lived assets:
|
|
|
|
|
|
|
North America
|
|
$ |
4,268 |
|
|
$ |
3,510 |
|
South America
|
|
|
781 |
|
|
|
79 |
|
Europe
|
|
|
270 |
|
|
|
51 |
|
Asia
|
|
|
699 |
|
|
|
5 |
|
Total Long-lived assets
|
|
$ |
6,018 |
|
|
$ |
3,645 |
|
Goodwill
In connection with the change in reporting segments, the Company allocated the goodwill to the new segments under the provisions of ASC 350. The changes in the carrying amount of goodwill by reportable segment due to the current year realignment are as follows:
|
|
Rigid Open Top
|
|
|
Rigid Closed Top
|
|
|
Engineered Materials
|
|
|
Flexible Packaging
|
|
|
Consumer
Packaging
|
|
|
Health, Hygiene & Specialties
|
|
|
Total
|
|
Balance as of September 26, 2015
|
|
$ |
681 |
|
|
$ |
823 |
|
|
$ |
69 |
|
|
$ |
79 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
1,652 |
|
Segment reorganization
|
|
|
(681 |
) |
|
|
(823 |
) |
|
|
15 |
|
|
|
(79 |
) |
|
|
1,520 |
|
|
|
48 |
|
|
|
- |
|
Acquisitions, net
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
821 |
|
|
|
821 |
|
Foreign currency translation adjustment
|
|
|
- |
|
|
|
- |
|
|
|
(1 |
) |
|
|
- |
|
|
|
(1 |
) |
|
|
(12 |
) |
|
|
(14 |
) |
Balance as of January 2, 2016
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
83 |
|
|
$ |
- |
|
|
$ |
1,519 |
|
|
$ |
857 |
|
|
$ |
2,459 |
|
11. Contingencies and Commitments
In July 2012, Berry Plastics Corporation (“BPC”) was sued by a customer for breach of contract, breach of express warranty, and breach of implied warranties. The customer alleged that in December 2007 and January 2008 BPC supplied the customer with defective woven polypropylene fabric used to manufacture containers that it then sold to its customers. In November 2015, a jury rendered a judgment in favor of the customer in the amount of $7.2 million. The Company believes the judgment is fully insured and intends to appeal the judgement and file certain post-trial motions.
The Company is party to various legal proceedings in addition to the above involving routine claims which are incidental to its business. Although the Company’s legal and financial liability with respect to such proceedings cannot be estimated with certainty, management believes that any ultimate liability would not be material to its financial statements. The Company has various purchase commitments for raw materials, supplies and property and equipment incidental to the ordinary conduct of business.
12. Basic and Diluted Net Income per Share
Basic net income per share is calculated by dividing the net income 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 per share is computed by dividing the net income 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 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 per share computations. The calculation below provides net income on both basic and diluted basis for the quarterly period ended January 2, 2016 and December 27, 2014:
|
|
Quarterly Period Ended
|
|
(in millions, except per share amounts)
|
|
January 2, 2016
|
|
|
December 27, 2014
|
|
Numerator
|
|
|
|
|
|
|
Consolidated net income
|
|
$ |
4 |
|
|
$ |
13 |
|
Denominator
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - basic
|
|
|
120.1 |
|
|
|
118.2 |
|
Dilutive shares
|
|
|
4.8 |
|
|
|
4.7 |
|
Weighted average common and common equivalent shares outstanding - diluted
|
|
|
124.9 |
|
|
|
122.9 |
|
|
|
|
|
|
|
|
|
|
Per common share income
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
0.03 |
|
|
$ |
0.11 |
|
Diluted
|
|
$ |
0.03 |
|
|
$ |
0.11 |
|
13. Accumulated Other 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 three months ended January 2, 2016 were as follows:
|
|
|
|
|
Defined Benefit Pension and Retiree Health Benefit Plans
|
|
|
|
|
|
Accumulated Other Comprehensive Loss
|
|
Balance at September 26, 2015
|
|
$ |
(81 |
) |
|
$ |
(25 |
) |
|
$ |
(13 |
) |
|
$ |
(119 |
) |
Other comprehensive loss
|
|
|
(29 |
) |
|
|
— |
|
|
|
4 |
|
|
|
(25 |
) |
Tax expense
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
(1 |
) |
Balance at January 2, 2016
|
|
$ |
(110 |
) |
|
$ |
(25 |
) |
|
$ |
(10 |
) |
|
$ |
(145 |
) |
14. Purchase of Non-controlling Interest
At the time of our acquisition of Avintiv, it indirectly owned a 71.25% controlling interest in Providência their Brazilian subsidiary that they acquired in 2014. In the January 2, 2016 quarter, the Company, through a wholly-owned subsidiary, acquired the remaining 28.75% non-controlling ownership interest of Providência for $66 million of cash. As a result of this transaction, Providência became a wholly-owned subsidiary of the Company and the Company recorded $3 million to Additional paid-in capital.
15. 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, excluding those domestic facilities acquired in the Avintiv acquisition owned by foreign subsidiaries, and our non-guarantor subsidiaries include our foreign subsidiaries, the Avintiv domestic facilities mentioned above, 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
|
|
January 2, 2016
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Guarantor
Subsidiaries
|
|
|
Non—
Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Total
|
|
Current assets
|
|
|
1 |
|
|
|
162 |
|
|
|
855 |
|
|
|
674 |
|
|
|
— |
|
|
|
1,692 |
|
Intercompany receivable
|
|
|
376 |
|
|
|
3,122 |
|
|
|
— |
|
|
|
63 |
|
|
|
(3,561 |
) |
|
|
— |
|
Property, plant, and equipment, net
|
|
|
— |
|
|
|
77 |
|
|
|
1,342 |
|
|
|
878 |
|
|
|
— |
|
|
|
2,297 |
|
Other assets
|
|
|
64 |
|
|
|
3,865 |
|
|
|
4,307 |
|
|
|
1,287 |
|
|
|
(5,802 |
) |
|
|
3,721 |
|
Total assets
|
|
$ |
441 |
|
|
$ |
7,226 |
|
|
$ |
6,504 |
|
|
$ |
2,902 |
|
|
$ |
(9,363 |
) |
|
$ |
7,710 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
77 |
|
|
|
184 |
|
|
|
440 |
|
|
|
345 |
|
|
|
— |
|
|
|
1,046 |
|
Intercompany payable
|
|
|
— |
|
|
|
— |
|
|
|
3,455 |
|
|
|
106 |
|
|
|
(3,561 |
) |
|
|
— |
|
Other long-term liabilities
|
|
|
431 |
|
|
|
6,158 |
|
|
|
81 |
|
|
|
61 |
|
|
|
— |
|
|
|
6,731 |
|
Non-controlling interest
|
|
|
12 |
|
|
|
— |
|
|
|
— |
|
|
|
12 |
|
|
|
(12 |
) |
|
|
12 |
|
Stockholders’ equity (deficit)
|
|
|
(79 |
) |
|
|
884 |
|
|
|
2,528 |
|
|
|
2,378 |
|
|
|
(5,790 |
) |
|
|
(79 |
) |
Total liabilities and stockholders’ equity (deficit)
|
|
$ |
441 |
|
|
$ |
7,226 |
|
|
$ |
6,504 |
|
|
$ |
2,902 |
|
|
$ |
(9,363 |
) |
|
$ |
7,710 |
|
|
|
September 26, 2015
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Guarantor
Subsidiaries
|
|
|
Non—
Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Total
|
|
Current assets
|
|
|
162 |
|
|
|
257 |
|
|
|
767 |
|
|
|
197 |
|
|
|
— |
|
|
|
1,383 |
|
Intercompany receivable
|
|
|
329 |
|
|
|
2,963 |
|
|
|
— |
|
|
|
83 |
|
|
|
(3,375 |
) |
|
|
— |
|
Property, plant and equipment, net
|
|
|
— |
|
|
|
79 |
|
|
|
1,111 |
|
|
|
104 |
|
|
|
— |
|
|
|
1,294 |
|
Other assets
|
|
|
75 |
|
|
|
1,553 |
|
|
|
2,152 |
|
|
|
102 |
|
|
|
(1,531 |
) |
|
|
2,351 |
|
Total assets
|
|
$ |
566 |
|
|
$ |
4,852 |
|
|
$ |
4,030 |
|
|
$ |
486 |
|
|
$ |
(4,906 |
) |
|
$ |
5,028 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
57 |
|
|
|
205 |
|
|
|
366 |
|
|
|
77 |
|
|
|
— |
|
|
|
705 |
|
Intercompany payable
|
|
|
— |
|
|
|
— |
|
|
|
3,375 |
|
|
|
— |
|
|
|
(3,375 |
) |
|
|
— |
|
Other long-term liabilities
|
|
|
562 |
|
|
|
3,769 |
|
|
|
39 |
|
|
|
6 |
|
|
|
— |
|
|
|
4,376 |
|
Non-controlling interest
|
|
|
12 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
12 |
|
Stockholders’ equity (deficit)
|
|
|
(65 |
) |
|
|
878 |
|
|
|
250 |
|
|
|
403 |
|
|
|
(1,531 |
) |
|
|
(65 |
) |
Total liabilities and stockholders’ equity (deficit)
|
|
$ |
566 |
|
|
$ |
4,852 |
|
|
$ |
4,030 |
|
|
$ |
486 |
|
|
$ |
(4,906 |
) |
|
$ |
5,028 |
|
|
|
Quarterly Period Ended January 2, 2016
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Guarantor
Subsidiaries
|
|
|
Non-
Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Total
|
|
Net sales
|
|
$ |
— |
|
|
$ |
150 |
|
|
$ |
992 |
|
|
$ |
470 |
|
|
$ |
— |
|
|
$ |
1,612 |
|
Cost of goods sold
|
|
|
— |
|
|
|
123 |
|
|
|
815 |
|
|
|
382 |
|
|
|
— |
|
|
|
1,320 |
|
Selling, general and administrative
|
|
|
— |
|
|
|
56 |
|
|
|
75 |
|
|
|
23 |
|
|
|
— |
|
|
|
154 |
|
Amortization of intangibles
|
|
|
— |
|
|
|
2 |
|
|
|
26 |
|
|
|
8 |
|
|
|
— |
|
|
|
36 |
|
Restructuring and impairment charges
|
|
|
— |
|
|
|
— |
|
|
|
15 |
|
|
|
1 |
|
|
|
— |
|
|
|
16 |
|
Operating income (loss)
|
|
|
— |
|
|
|
(31 |
) |
|
|
61 |
|
|
|
56 |
|
|
|
— |
|
|
|
86 |
|
Other expense (income), net
|
|
|
— |
|
|
|
(1 |
) |
|
|
(4 |
) |
|
|
9 |
|
|
|
— |
|
|
|
4 |
|
Interest expense, net
|
|
|
— |
|
|
|
9 |
|
|
|
46 |
|
|
|
20 |
|
|
|
— |
|
|
|
75 |
|
Equity in net income of subsidiaries
|
|
|
(7 |
) |
|
|
(33 |
) |
|
|
— |
|
|
|
— |
|
|
|
40 |
|
|
|
— |
|
Income (loss) before income taxes
|
|
|
7 |
|
|
|
(6 |
) |
|
|
19 |
|
|
|
27 |
|
|
|
(40 |
) |
|
|
7 |
|
Income tax expense (benefit)
|
|
|
3 |
|
|
|
(8 |
) |
|
|
— |
|
|
|
12 |
|
|
|
(4 |
) |
|
|
3 |
|
Net income (loss)
|
|
$ |
4 |
|
|
$ |
2 |
|
|
$ |
19 |
|
|
$ |
15 |
|
|
$ |
(36 |
) |
|
$ |
4 |
|
Comprehensive income (loss)
|
|
$ |
4 |
|
|
$ |
5 |
|
|
$ |
19 |
|
|
$ |
(14 |
) |
|
$ |
(36 |
) |
|
$ |
(22 |
) |
Consolidating Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow from Operating Activities
|
|
$ |
— |
|
|
$ |
(30 |
) |
|
$ |
153 |
|
|
$ |
68 |
|
|
$ |
— |
|
|
$ |
191 |
|
Cash Flow from Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property, plant, and equipment
|
|
|
— |
|
|
|
(3 |
) |
|
|
(80 |
) |
|
|
(10 |
) |
|
|
— |
|
|
|
(93 |
) |
Proceeds from sale of assets
|
|
|
— |
|
|
|
— |
|
|
|
4 |
|
|
|
— |
|
|
|
— |
|
|
|
4 |
|
(Contributions) distributions to/from subsidiaries
|
|
|
(7 |
) |
|
|
(2,253 |
) |
|
|
— |
|
|
|
— |
|
|
|
2,260 |
|
|
|
— |
|
Intercompany advances (repayments)
|
|
|
— |
|
|
|
(162 |
) |
|
|
— |
|
|
|
— |
|
|
|
162 |
|
|
|
— |
|
Acquisition of business, net of cash acquired
|
|
|
— |
|
|
|
— |
|
|
|
(291 |
) |
|
|
(1,995 |
) |
|
|
— |
|
|
|
(2,286 |
) |
Net cash from investing activities
|
|
|
(7 |
) |
|
|
(2,418 |
) |
|
|
(367 |
) |
|
|
(2,005 |
) |
|
|
2,392 |
|
|
|
(2,375 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow from Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from long-term borrowings
|
|
|
— |
|
|
|
2,489 |
|
|
|
— |
|
|
|
3 |
|
|
|
— |
|
|
|
2,492 |
|
Purchase of non-controlling interest
|
|
|
— |
|
|
|
— |
|
|
|
(66 |
) |
|
|
— |
|
|
|
— |
|
|
|
(66 |
) |
Proceeds from issuance of common stock
|
|
|
7 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7 |
|
Payment of tax receivable agreement
|
|
|
(57 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(57 |
) |
Repayments on long-term borrowings
|
|
|
— |
|
|
|
(70 |
) |
|
|
— |
|
|
|
(30 |
) |
|
|
— |
|
|
|
(100 |
) |
Contribution from parent
|
|
|
— |
|
|
|
— |
|
|
|
291 |
|
|
|
1,969 |
|
|
|
(2,260 |
) |
|
|
— |
|
Debt financing costs
|
|
|
— |
|
|
|
(36 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(36 |
) |
Changes in intercompany balances
|
|
|
57 |
|
|
|
— |
|
|
|
7 |
|
|
|
98 |
|
|
|
(162 |
) |
|
|
— |
|
Net cash provided from financing activities
|
|
|
7 |
|
|
|
2,383 |
|
|
|
232 |
|
|
|
2,040 |
|
|
|
(2,392 |
) |
|
|
2,240 |
|
Effect of exchange rate on cash
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2 |
) |
|
|
— |
|
|
|
(2 |
) |
Net change in cash
|
|
|
— |
|
|
|
(65 |
) |
|
|
18 |
|
|
|
101 |
|
|
|
— |
|
|
|
54 |
|
Cash and cash equivalents at beginning of period
|
|
|
— |
|
|
|
163 |
|
|
|
— |
|
|
|
65 |
|
|
|
— |
|
|
|
228 |
|
Cash and cash equivalents at end of period
|
|
$ |
— |
|
|
$ |
98 |
|
|
$ |
18 |
|
|
$ |
166 |
|
|
$ |
— |
|
|
$ |
282 |
|
|
|
Quarterly Period Ended December 27, 2014
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Guarantor
Subsidiaries
|
|
|
Non-Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Total
|
|
Net sales
|
|
$ |
— |
|
|
$ |
159 |
|
|
$ |
948 |
|
|
$ |
113 |
|
|
$ |
— |
|
|
$ |
1,220 |
|
Cost of goods sold
|
|
|
— |
|
|
|
147 |
|
|
|
809 |
|
|
|
81 |
|
|
|
— |
|
|
|
1,037 |
|
Selling, general and administrative
|
|
|
— |
|
|
|
16 |
|
|
|
59 |
|
|
|
10 |
|
|
|
— |
|
|
|
85 |
|
Amortization of intangibles
|
|
|
— |
|
|
|
2 |
|
|
|
21 |
|
|
|
2 |
|
|
|
— |
|
|
|
25 |
|
Restructuring and impairment charges
|
|
|
— |
|
|
|
— |
|
|
|
5 |
|
|
|
— |
|
|
|
— |
|
|
|
5 |
|
Operating income (loss)
|
|
|
— |
|
|
|
(6 |
) |
|
|
54 |
|
|
|
20 |
|
|
|
— |
|
|
|
68 |
|
Other income, net
|
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
Interest expense, net
|
|
|
— |
|
|
|
7 |
|
|
|
41 |
|
|
|
5 |
|
|
|
— |
|
|
|
53 |
|
Equity in net income of subsidiaries
|
|
|
(16 |
) |
|
|
(28 |
) |
|
|
— |
|
|
|
— |
|
|
|
44 |
|
|
|
— |
|
Income (loss) before income taxes
|
|
|
16 |
|
|
|
16 |
|
|
|
13 |
|
|
|
15 |
|
|
|
(44 |
) |
|
|
16 |
|
Income tax expense (benefit)
|
|
|
3 |
|
|
|
2 |
|
|
|
— |
|
|
|
1 |
|
|
|
(3 |
) |
|
|
3 |
|
Net income (loss)
|
|
$ |
13 |
|
|
$ |
14 |
|
|
$ |
13 |
|
|
$ |
14 |
|
|
$ |
(41 |
) |
|
$ |
13 |
|
Comprehensive income (loss)
|
|
$ |
13 |
|
|
$ |
13 |
|
|
$ |
9 |
|
|
$ |
— |
|
|
$ |
(41 |
) |
|
$ |
(6 |
) |
Consolidating Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow from Operating Activities
|
|
$ |
— |
|
|
$ |
(16 |
) |
|
$ |
102 |
|
|
$ |
14 |
|
|
$ |
— |
|
|
$ |
100 |
|
Cash Flow from Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property, plant, and equipment
|
|
|
— |
|
|
|
(3 |
) |
|
|
(30 |
) |
|
|
(2 |
) |
|
|
— |
|
|
|
(35 |
) |
Proceeds from sale of assets
|
|
|
— |
|
|
|
— |
|
|
|
10 |
|
|
|
— |
|
|
|
— |
|
|
|
10 |
|
(Contributions) distributions to/from subsidiaries
|
|
|
(7 |
) |
|
|
7 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Intercompany advances (repayments)
|
|
|
— |
|
|
|
55 |
|
|
|
— |
|
|
|
— |
|
|
|
(55 |
) |
|
|
— |
|
Acquisition of business, net of cash acquired
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net cash from investing activities
|
|
|
(7 |
) |
|
|
59 |
|
|
|
(20 |
) |
|
|
(2 |
) |
|
|
(55 |
) |
|
|
(25 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow from Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from long-term borrowings
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Proceeds from issuance of common stock
|
|
|
7 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7 |
|
Payment of tax receivable agreement
|
|
|
(39 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(39 |
) |
Repayments on long-term borrowings
|
|
|
— |
|
|
|
(115 |
) |
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
(116 |
) |
Changes in intercompany balances
|
|
|
39 |
|
|
|
— |
|
|
|
(91 |
) |
|
|
(3 |
) |
|
|
55 |
|
|
|
— |
|
Net cash provided from financing activities
|
|
|
7 |
|
|
|
(115 |
) |
|
|
(91 |
) |
|
|
(4 |
) |
|
|
55 |
|
|
|
(148 |
) |
Effect of exchange rate on cash
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3 |
) |
|
|
— |
|
|
|
(3 |
) |
Net change in cash
|
|
|
— |
|
|
|
(72 |
) |
|
|
(9 |
) |
|
|
5 |
|
|
|
— |
|
|
|
(76 |
) |
Cash and cash equivalents at beginning of period
|
|
|
— |
|
|
|
70 |
|
|
|
15 |
|
|
|
44 |
|
|
|
— |
|
|
|
129 |
|
Cash and cash equivalents at end of period
|
|
$ |
— |
|
|
$ |
(2 |
) |
|
$ |
6 |
|
|
$ |
49 |
|
|
$ |
— |
|
|
|