bpg10q020513.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 December 29, 2012
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
|
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:
Title of Each Class
|
Name of Each Exchange on Which Registered
|
Common Stock, $0.01 par value per share
|
New York Stock Exchange
|
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934. Yes [ ] No [ X]
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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K: [ ]
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 [ ] Accelerated filer [ ] Non-accelerated filer [ X ] 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 ]
As of February 5, 2013, there were approximately 113,038,346 shares of the registrant’s common stock outstanding.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), 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,” or “anticipates” 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.
Important factors that could cause actual results to differ materially from our expectations, which we refer to as cautionary statements, including, without limitation, in conjunction with the forward-looking statements included in this Form 10-Q. All forward-looking information and subsequent written and oral forward-looking statements attributable to us, or to persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements. Some of the factors that we believe could affect our results include:
·
|
risks associated with our substantial indebtedness and debt service;
|
·
|
changes in prices and availability of resin and other raw materials and our ability to pass on changes in raw material prices on a timely basis;
|
·
|
performance of our business and future operating results;
|
·
|
risks related to our acquisition strategy and integration of acquired businesses;
|
·
|
reliance on unpatented know-how and trade secrets;
|
·
|
increases in the cost of compliance with laws and regulations, including environmental, safety, and production and product laws and regulations;
|
·
|
risks related to disruptions in the overall economy and the financial markets may adversely impact our business;
|
·
|
catastrophic loss of one of our key manufacturing facilities, natural disasters, and other unplanned business interruptions;
|
·
|
risks of competition, including foreign competition, in our existing and future markets;
|
·
|
general business and economic conditions, particularly an economic downturn;
|
·
|
the ability of our insurance to cover fully our potential exposures; and
|
·
|
the other factors discussed in our Form 10-K for the fiscal year ended September 29, 2012 in the section titled “Risk Factors.”
|
We caution readers that the foregoing list of important factors may not contain all of the material factors that are important to you. In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this Form 10-Q may not in fact occur. Accordingly, investors should not place undue reliance on those statements. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.
Readers should carefully review the factors discussed in our Form 10-K for the fiscal year ended September 29, 2012 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 (“SEC”) and should not place undue reliance on our forward-looking statements. We undertake no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.
AVAILABLE INFORMATION
We make available, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments, if any, to those reports through our Internet website as soon as practicable after they have been electronically filed with or furnished to the SEC. Our internet address is www.berryplastics.com. The information contained on our website is not being incorporated herein.
Berry Plastics Group, Inc.
Form 10-Q Index
For Quarterly Period Ended December 29, 2012
|
|
|
Page No.
|
Part I.
|
Financial Information
|
|
|
|
|
|
|
Item 1.
|
Financial Statements:
|
|
|
|
Consolidated Balance Sheets
|
5
|
|
|
Consolidated Statements of Operations and Comprehensive Income (Loss)
|
6
|
|
|
Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
|
7
|
|
|
Consolidated Statements of Cash Flows
|
8
|
|
|
Notes to Consolidated Financial Statements
|
9
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
21
|
|
Item 3.
|
Quantitative and Qualitative Disclosures about Market Risk
|
26
|
|
Item 4.
|
Controls and Procedures
|
27
|
|
|
|
|
Part II.
|
Other Information
|
|
|
|
|
|
|
Item 1.
|
Legal Proceedings
|
27
|
|
Item 1A.
|
Risk Factors
|
27
|
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
27
|
|
Item 3.
|
Defaults Upon Senior Securities
|
27
|
|
Item 4.
|
Mine Safety Disclosures
|
27
|
|
Item 5.
|
Other Information
|
27
|
|
Item 6.
|
Exhibits
|
27
|
|
Signature
|
|
28
|
Berry Plastics Group, Inc.
Consolidated Balance Sheets
(in millions of dollars, except per share data)
|
|
|
|
|
|
|
Assets
|
|
(Unaudited)
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
32 |
|
|
$ |
87 |
|
Accounts receivable (less allowance of $3 at December 29, 2012 and September 29, 2012)
|
|
|
396 |
|
|
|
455 |
|
Inventories
|
|
|
551 |
|
|
|
535 |
|
Deferred income taxes
|
|
|
185 |
|
|
|
114 |
|
Prepaid expenses and other current assets
|
|
|
31 |
|
|
|
42 |
|
Total current assets
|
|
|
1,195 |
|
|
|
1,233 |
|
Property, plant, and equipment, net
|
|
|
1,223 |
|
|
|
1,216 |
|
Goodwill, intangible assets and deferred costs
|
|
|
2,620 |
|
|
|
2,636 |
|
Other assets
|
|
|
12 |
|
|
|
21 |
|
Total assets
|
|
$ |
5,050 |
|
|
$ |
5,106 |
|
Liabilities and stockholders’ equity (deficit)
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$ |
285 |
|
|
$ |
306 |
|
Accrued expenses and other current liabilities
|
|
|
385 |
|
|
|
300 |
|
Current portion of long-term debt
|
|
|
43 |
|
|
|
40 |
|
Total current liabilities
|
|
|
713 |
|
|
|
646 |
|
Long-term debt, less current portion
|
|
|
3,932 |
|
|
|
4,431 |
|
Deferred income taxes
|
|
|
381 |
|
|
|
315 |
|
Other long-term liabilities
|
|
|
337 |
|
|
|
166 |
|
Total liabilities
|
|
|
5,363 |
|
|
|
5,558 |
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Redeemable shares
|
|
|
— |
|
|
|
23 |
|
Stockholders’ equity (deficit):
|
|
|
|
|
|
|
|
|
Common stock; ($0.01 par value; 400,000,000 shares authorized; 113,038,346 shares issued and outstanding as of December 29, 2012; 84,696,218 issued and 83,209,232 outstanding as of September 29, 2012)
|
|
|
1 |
|
|
|
1 |
|
Paid-in capital
|
|
|
300 |
|
|
|
131 |
|
Notes receivable—common stock
|
|
|
(2 |
) |
|
|
(2 |
) |
Non-controlling interest
|
|
|
3 |
|
|
|
3 |
|
Accumulated deficit
|
|
|
(571 |
) |
|
|
(561 |
) |
Accumulated other comprehensive loss
|
|
|
(44 |
) |
|
|
(47 |
) |
Total stockholders’ equity (deficit)
|
|
|
(313 |
) |
|
|
(475 |
) |
Total liabilities and stockholders’ equity (deficit)
|
|
$ |
5,050 |
|
|
$ |
5,106 |
|
See notes to consolidated financial statements.
Berry Plastics Group, Inc.
Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
(in millions of dollars, except per share data)
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$ |
1,072 |
|
|
$ |
1,137 |
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
Cost of goods sold
|
|
|
895 |
|
|
|
985 |
|
Selling, general and administrative
|
|
|
77 |
|
|
|
72 |
|
Amortization of intangibles
|
|
|
27 |
|
|
|
28 |
|
Restructuring and impairment charges
|
|
|
5 |
|
|
|
23 |
|
Operating income
|
|
|
68 |
|
|
|
29 |
|
Debt extinguishment
|
|
|
16 |
|
|
|
— |
|
Other income
|
|
|
(3 |
) |
|
|
(4 |
) |
Interest expense
|
|
|
70 |
|
|
|
83 |
|
Loss before income taxes
|
|
|
(15 |
) |
|
|
(50 |
) |
Income tax benefit
|
|
|
(5 |
) |
|
|
(19 |
) |
Net loss
|
|
$ |
(10 |
) |
|
$ |
(31 |
) |
Net loss per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
(0.09 |
) |
|
|
(0.37 |
) |
Diluted
|
|
|
(0.09 |
) |
|
|
(0.37 |
) |
Weighted-average number of shares outstanding:
(in thousands)
|
|
|
|
|
|
|
|
|
Basic
|
|
|
111,352 |
|
|
|
83,851 |
|
Diluted
|
|
|
111,352 |
|
|
|
83,851 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
$ |
(7 |
) |
|
$ |
(31 |
) |
See notes to consolidated financial statements.
Berry Plastics Group, Inc.
Consolidated Statement of Changes in Stockholders’ Equity (Deficit)
For the Quarterly Period Ended December 29, 2012 and December 31, 2011
(Unaudited)
(in millions of dollars)
|
|
Common Stock
|
|
|
Paid-in Capital
|
|
|
Notes Receivable-Common Stock
|
|
|
Non-controlling Interest
|
|
|
Accumulated Other Comprehensive Loss
|
|
|
Accumulated Deficit
|
|
|
Total
|
|
Balance at October 1, 2011
|
|
$ |
— |
|
|
$ |
143 |
|
|
$ |
(2 |
) |
|
$ |
3 |
|
|
$ |
(48 |
) |
|
$ |
(563 |
) |
|
$ |
(467 |
) |
Stock compensation expense
|
|
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
Derivative amortization
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
1 |
|
Net loss
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(31 |
) |
|
|
(31 |
) |
Balance at December 31, 2011
|
|
|
— |
|
|
|
144 |
|
|
|
(2 |
) |
|
|
3 |
|
|
|
(47 |
) |
|
|
(594 |
) |
|
|
(496 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 29, 2012
|
|
$ |
1 |
|
|
$ |
131 |
|
|
$ |
(2 |
) |
|
$ |
3 |
|
|
$ |
(47 |
) |
|
$ |
(561 |
) |
|
$ |
(475 |
) |
Proceeds from issuance of common stock
|
|
|
— |
|
|
|
4 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4 |
|
Stock compensation expense
|
|
|
— |
|
|
|
4 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4 |
|
Termination of redeemable shares redemption requirement
|
|
|
— |
|
|
|
23 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
23 |
|
Proceeds from initial public offering
|
|
|
— |
|
|
|
438 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
438 |
|
Initial obligation under tax receivable agreement
|
|
|
— |
|
|
|
(300 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(300 |
) |
Derivative amortization
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
1 |
|
Net loss
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(10 |
) |
|
|
(10 |
) |
Currency translation
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
|
|
— |
|
|
|
2 |
|
Balance at December 29, 2012
|
|
$ |
1 |
|
|
$ |
300 |
|
|
$ |
(2 |
) |
|
$ |
3 |
|
|
$ |
(44 |
) |
|
$ |
(571 |
) |
|
$ |
(313 |
) |
See notes to consolidated financial statements.
Berry Plastics Group, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(in millions of dollars)
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
Net loss
|
|
$ |
(10 |
) |
|
$ |
(31 |
) |
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
60 |
|
|
|
61 |
|
Amortization of intangibles
|
|
|
27 |
|
|
|
28 |
|
Non-cash interest expense
|
|
|
5 |
|
|
|
5 |
|
Deferred income tax expense (benefit)
|
|
|
(5 |
) |
|
|
(18 |
) |
Loss on disposal and impairment of assets
|
|
|
— |
|
|
|
21 |
|
Debt extinguishment
|
|
|
16 |
|
|
|
— |
|
Other non-cash expense (income)
|
|
|
5 |
|
|
|
— |
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
|
61 |
|
|
|
80 |
|
Inventories
|
|
|
(14 |
) |
|
|
48 |
|
Prepaid expenses and other assets
|
|
|
12 |
|
|
|
(7 |
) |
Accounts payable and other liabilities
|
|
|
(70 |
) |
|
|
(98 |
) |
Net cash from operating activities
|
|
|
87 |
|
|
|
89 |
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
Additions to property, plant and equipment
|
|
|
(45 |
) |
|
|
(45 |
) |
Proceeds from sale of assets
|
|
|
2 |
|
|
|
8 |
|
Acquisition of businesses, net of cash acquired
|
|
|
(20 |
) |
|
|
— |
|
Net cash from investing activities
|
|
|
(63 |
) |
|
|
(37 |
) |
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
Proceeds from long-term borrowings
|
|
|
1 |
|
|
|
— |
|
Repayments on long-term borrowings
|
|
|
(522 |
) |
|
|
(65 |
) |
Proceeds from issuance of common stock
|
|
|
4 |
|
|
|
— |
|
Proceeds from initial public offering
|
|
|
438 |
|
|
|
— |
|
Net cash from financing activities
|
|
|
(79 |
) |
|
|
(65 |
) |
Effect of exchange rate changes on cash
|
|
|
— |
|
|
|
— |
|
Net change in cash
|
|
|
(55 |
) |
|
|
(13 |
) |
Cash and cash equivalents at beginning of period
|
|
|
87 |
|
|
|
42 |
|
Cash and cash equivalents at end of period
|
|
$ |
32 |
|
|
$ |
29 |
|
See notes to consolidated financial statements.
Berry Plastics Group, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
1. Background
Berry Plastics Group, Inc. (“Berry” or the “Company”) is a leading provider of value-added plastic consumer packaging and engineered materials with a track record of delivering high-quality customized solutions to our customers. Representative examples of our products include thermoform drink cups, thin-wall containers, blow-molded bottles, specialty closures, prescription vials, specialty plastic films, adhesives and corrosion protection materials. We sell our solutions predominantly into consumer-oriented end-markets, such as food and beverage, healthcare and personal care.
2. Basis of Presentation
Berry is majority owned by affiliates of Apollo Management, L.P. (“Apollo”) and Graham Partners (“Graham”). Berry, through its wholly-owned subsidiaries operates in four primary segments: Rigid Open Top, Rigid Closed Top, Engineered Materials, and Flexible Packaging. The Company’s customers are located principally throughout the United States, without significant concentration in any one region or with any one customer. The accompanying unaudited Consolidated Financial Statements of 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. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full fiscal year. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Form 10-K filed with the Securities and Exchange Commission for the fiscal year end September 29, 2012. All intercompany transactions have been eliminated. The Company issued financial statements by filing with the Securities and Exchange Commission and has evaluated subsequent events up to the time of the filing.
Reclassification Adjustments
|
Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation. The Company historically presented Other operating expenses in its Consolidated Statements of Operations, which consisted predominately of business optimization costs and management fees to affiliates of Apollo and Graham. The Company has eliminated separate presentation of Other operating expenses from its Consolidated Statements of Operations to better align with the way the Company is reviewing its operating results. For the quarterly periods ended December 29, 2012 and December 31, 2011 business optimization costs were $9 million and $13 million, respectively and are included in Cost of goods sold. For the quarterly periods ended December 29, 2012 and December 31, 2011 management fees were $0 and $2 million, respectively, and are included in Selling, general and administrative expenses.
In October 2012, the Company filed an initial public offering and sold 29,411,764 shares of common stock at $16.00 per share. In conjunction with the initial public offering the Company executed a 12.25 for one stock split of the Company’s common stock. The effect of the stock split on outstanding shares and earnings per share has been retroactively applied to all periods presented. Transaction fees totaling $33 million were included in Paid-in capital on the Consolidated Balance Sheets. Proceeds, net of transaction fees, of $438 million and cash from operations were used to repurchase $455 million of 11% Senior Subordinated Notes due September 2016. As part of the repurchase the Company paid premiums of $13 million and wrote-off $3 million of deferred financing fees.
Tax Receivable Agreement
In connection with the initial public offering, the Company entered into an income tax receivable agreement ("TRA") that provides for the payment to pre-initial public offering stockholders, option holders and holders of our stock appreciation rights, 85% of the amount of cash savings, if any, in U.S. federal, foreign, state and local income tax that are actually realized (or are deemed to be realized in the case of a change of control) as a result of the utilization of our and our subsidiaries’ net operating losses attributable to periods prior to the initial public offering. The Company expects to pay between $300 million and $350 million in cash related to this agreement. This range is based on the Company's assumptions using various items, including valuation analysis and current tax law. Upon the effective date of the TRA, the Company recorded an initial obligation of $300 million ($123 million in Accrued expenses and $177 million in Other long-term liabilities) which is recognized as a reduction of Paid-in capital on the Consolidated Balance Sheet as of December 29, 2012. Changes in the recorded net deferred income tax assets will result in changes in the TRA obligation, and such changes will be recorded as Other expense (income) in the Consolidated Statement of Operations. Payments under the TRA are not conditioned upon the parties' continued ownership of the Company.
Redeemable Common Stock
As of September 29, 2012, the Company had entered into agreements with former employees that required the Company to redeem this common stock at pre-determined dates. Historical redemption of this stock was based on the fair value of the stock on the fixed redemption date. This redeemable common stock was recorded at its fair value in temporary equity and changes in the fair value were recorded in additional paid in capital each period. Upon completion of the initial public offering, the redemption requirement terminated resulting in the Company reclassifying the shares into equity on the Consolidated Balance Sheets.
Other Related Party Transactions
|
The Company recorded management fees of $2 million for the quarterly period ended December 31, 2011, charged by Apollo and other investors to the Company. The Company’s management fee agreement with Apollo and other investors terminated upon completion of the initial public offering.
BP Parallel LLC, a non-guarantor subsidiary of the Company, invested $21 million to purchase assignments of $21 million of unsecured term loan during the quarter ended December 29, 2012. Of the $21 million assignments purchased, $14 million were purchased from third parties affiliated with Apollo.
3. Acquisitions
Stopaq®
In June 2012, the Company acquired 100% of the shares of Frans Nooren Beheer B.V. and its operating companies (“Stopaq”) for a purchase price of $65 million ($62 million, net of cash acquired). Stopaq is the inventor and manufacturer of patented visco-elastic technologies for use in corrosion prevention, sealing and insulation applications ranging from pipelines to subsea piles to rail and cable joints. The newly added business is operated in the Company’s Engineered Materials reporting segment. To finance the purchase, the Company used cash on hand and existing credit facilities. The Stopaq acquisition has been accounted for under the purchase method of accounting, and accordingly, the preliminary purchase price has been allocated to the identifiable assets and liabilities based on estimated fair values at the acquisition date. The Company has not finalized the purchase price allocation to the fair value on fixed assets, deferred income taxes, intangibles and is reviewing all the working capital acquired. The Company has recognized goodwill on this transaction as a result of expected synergies. A portion of the goodwill will not be deductible for tax purposes.
Prime Label
In October 2012, the Company acquired 100% of the shares of Prime Label and Screen Incorporated (“Prime Label”) for a purchase price of $20 million. Prime is a leader in specialty re-sealable labels, including a patented rigid lens closure system. The newly added business is operated in the Company’s Flexible Packaging reporting segment. To finance the purchase, the Company used cash on hand and existing credit facilities. The Prime Label acquisition has been accounted for under the purchase method of accounting, and accordingly, the preliminary purchase price has been allocated to the identifiable assets and liabilities based on estimated fair values at the acquisition date. The Company has not finalized the purchase price allocation to the fair value on fixed assets, deferred income taxes, intangibles and is reviewing all the working capital acquired. The Company has recognized goodwill on this transaction as a result of expected synergies. A portion of the goodwill will not be deductible for tax purposes.
4. Restructuring and Impairment Charges
The Company incurred restructuring costs related to severance, asset impairment and facility exit costs of $5 million and $23 million for the quarterly period ended December 29, 2012 and December 31, 2011, respectively. The tables below set forth the significant components of the restructuring charges recognized for the quarterly period ended December 29, 2012 and December 31, 2011, by segment:
|
|
|
|
|
|
|
|
|
|
|
Rigid Open Top
|
|
|
|
|
|
|
Severance and termination benefits
|
|
$ |
1 |
|
|
$ |
— |
|
Total
|
|
$ |
1 |
|
|
$ |
— |
|
Rigid Closed Top
|
|
|
|
|
|
|
|
|
Severance and termination benefits
|
|
$ |
1 |
|
|
$ |
2 |
|
Facility exit costs and other
|
|
|
1 |
|
|
|
— |
|
Asset impairment
|
|
|
— |
|
|
|
3 |
|
Total
|
|
$ |
2 |
|
|
$ |
5 |
|
Engineered Materials
|
|
|
|
|
|
|
|
|
Severance and termination benefits
|
|
$ |
1 |
|
|
$ |
1 |
|
Facility exit costs and other
|
|
|
— |
|
|
|
1 |
|
Asset impairment
|
|
|
— |
|
|
|
16 |
|
Total
|
|
$ |
1 |
|
|
$ |
18 |
|
Flexible Packaging
|
|
|
|
|
|
|
|
|
Severance and termination benefits
|
|
$ |
— |
|
|
$ |
— |
|
Facility exit costs and other
|
|
|
1 |
|
|
|
— |
|
Asset impairment
|
|
|
— |
|
|
|
— |
|
Total
|
|
$ |
1 |
|
|
$ |
— |
|
Consolidated
|
|
|
|
|
|
|
|
|
Severance and termination benefits
|
|
$ |
3 |
|
|
$ |
3 |
|
Facility exit costs and other
|
|
|
2 |
|
|
|
1 |
|
Asset impairment
|
|
|
— |
|
|
|
19 |
|
Total
|
|
$ |
5 |
|
|
$ |
23 |
|
The table below sets forth the activity with respect to the restructuring accrual at September 29, 2012 and December 29, 2012:
|
|
Severance and termination benefits
|
|
|
Facilities exit costs and other
|
|
|
|
|
|
|
|
Balance at October 1, 2011
|
|
$ |
4 |
|
|
$ |
3 |
|
|
$ |
— |
|
|
$ |
7 |
|
Charges
|
|
|
7 |
|
|
|
4 |
|
|
|
20 |
|
|
|
31 |
|
Non-cash asset impairment
|
|
|
— |
|
|
|
— |
|
|
|
(20 |
) |
|
|
(20 |
) |
Cash payments
|
|
|
(7 |
) |
|
|
(4 |
) |
|
|
— |
|
|
|
(11 |
) |
Balance at September 29, 2012
|
|
|
4 |
|
|
|
3 |
|
|
|
— |
|
|
|
7 |
|
Charges
|
|
|
3 |
|
|
|
2 |
|
|
|
— |
|
|
|
5 |
|
Cash payments
|
|
|
(2 |
) |
|
|
(2 |
) |
|
|
— |
|
|
|
(4 |
) |
Balance at December 29, 2012
|
|
$ |
5 |
|
|
$ |
3 |
|
|
$ |
— |
|
|
$ |
8 |
|
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.
|
|
|
|
|
|
|
Employee compensation, payroll and other taxes
|
|
$ |
61 |
|
|
$ |
95 |
|
Interest
|
|
|
62 |
|
|
|
60 |
|
Rebates
|
|
|
78 |
|
|
|
68 |
|
TRA obligation
|
|
|
123 |
|
|
|
— |
|
Other
|
|
|
61 |
|
|
|
77 |
|
|
|
$ |
385 |
|
|
$ |
300 |
|
The following table sets forth the totals included in Other long-term liabilities on the Consolidated Balance Sheets.
|
|
|
|
|
|
|
Lease retirement obligation
|
|
$ |
21 |
|
|
$ |
20 |
|
Sale-lease back deferred gain
|
|
|
33 |
|
|
|
34 |
|
Pension liability
|
|
|
82 |
|
|
|
84 |
|
TRA obligation
|
|
|
177 |
|
|
|
— |
|
Other
|
|
|
24 |
|
|
|
28 |
|
|
|
$ |
337 |
|
|
$ |
166 |
|
6. Long-Term Debt
Long-term debt consists of the following:
|
|
|
|
|
|
|
|
Term loan
|
April 2015
|
|
$ |
1,134 |
|
|
$ |
1,134 |
|
Revolving line of credit
|
June 2016
|
|
|
44 |
|
|
|
73 |
|
First Priority Senior Secured Floating Rate Notes
|
February 2015
|
|
|
681 |
|
|
|
681 |
|
8¼% First Priority Senior Secured Notes
|
November 2015
|
|
|
370 |
|
|
|
370 |
|
Second Priority Senior Secured Floating Rate Notes
|
September 2014
|
|
|
210 |
|
|
|
210 |
|
9½% Second Priority Senior Secured Notes
|
May 2018
|
|
|
500 |
|
|
|
500 |
|
9¾% Second Priority Senior Secured Notes
|
January 2021
|
|
|
800 |
|
|
|
800 |
|
Senior Unsecured Term Loan
|
June 2014
|
|
|
18 |
|
|
|
39 |
|
10¼% Senior Subordinated Notes
|
March 2016
|
|
|
127 |
|
|
|
127 |
|
11% Senior Subordinated Notes
|
September 2016
|
|
|
— |
|
|
|
455 |
|
Debt discount, net
|
|
|
|
(8 |
) |
|
|
(9 |
) |
Capital leases and other
|
Various
|
|
|
99 |
|
|
|
91 |
|
|
|
|
|
3,975 |
|
|
|
4,471 |
|
Less current portion of long-term debt
|
|
|
|
(43 |
) |
|
|
(40 |
) |
|
|
|
$ |
3,932 |
|
|
$ |
4,431 |
|
In October 2012, the Company filed an initial public offering and sold 29,411,764 shares of common stock at $16.00 per share. Proceeds, net of transaction fees, of $438 million and cash from operations were used to repurchase $455 million of 11% Senior Subordinated Notes.
In December 2012, BP Parallel LLC, invested $21 million to purchase assignments purchase assignments at then-prevailing market prices of $21 million of principal of the Senior Unsecured Term Loan.
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 fair value of the derivatives are offset by changes in the fair value of the related hedged item are 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.
In November 2010, the Company entered into two separate interest rate swap transactions to manage cash flow variability associated with $1 billion of the outstanding variable rate term loan debt (the “2010 Swaps”). The first agreement had a notional amount of $500 million and became effective in November 2010. The agreement swaps three month variable LIBOR contracts for a fixed three year rate of 0.8925% and expires in November 2013. The second agreement had a notional amount of $500 million and became effective in December 2010. The agreement swaps three month variable LIBOR contracts for a fixed three year rate of 1.0235% and expires in November 2013. In August 2011, the Company began utilizing 1-month LIBOR contracts for the underlying senior secured credit facility. The Company’s change in interest rate selection caused the Company to lose hedge accounting on both of the interest rate swaps. The Company recorded subsequent changes in fair value in the Consolidated Statement of Operations and will amortize the unrealized losses to Interest expense through the end of the respective swap agreements.
|
|
|
Derivatives not designated as hedging
instruments under FASB guidance
|
|
|
|
|
|
|
|
Interest rate swaps — 2010 Swaps
|
Other long-term liabilities
|
|
$ |
6 |
|
|
$ |
7 |
|
The effect of the derivative instruments on the Consolidated Statement of Operations is as follows:
|
|
|
|
|
Derivatives not designated as hedging
instruments under FASB guidance
|
Statement of Operations Location
|
|
|
|
|
|
|
|
Other expense (income)
|
|
$ |
(1 |
) |
|
$ |
(3 |
) |
Interest rate swaps — 2010 Swaps………….
|
Interest expense
|
|
$ |
1 |
|
|
$ |
1 |
|
The Fair Value Measurements and Disclosures section of the Accounting Standards Codification (“Codification” or “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 or 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 significant observable inputs were not available.
The Company’s financial instruments consist primarily of cash and cash equivalents, long-term debt, interest rate swap agreements and capital lease obligations. The fair value of the Company’s long-term debt was determined using Level 2 inputs, which include using quoted prices in inactive markets or significant other observable inputs for identical or comparable assets or liabilities. The following table summarizes our long-term indebtedness for which the book value was in excess of the fair value:
|
|
|
|
|
|
|
First Priority Senior Secured Floating Rate Notes
|
|
$ |
3 |
|
|
$ |
— |
|
Second Priority Senior Secured Floating Rate Notes
|
|
|
2 |
|
|
|
1 |
|
Senior Unsecured Term Loan
|
|
|
— |
|
|
|
6 |
|
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 a 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 conducted our annual step one evaluation of goodwill and other intangibles as of the first date of the fourth quarter and preliminarily determined no impairment existed for any of our reporting units. The Company has experienced volume declines in certain of our reporting units, however our cost reduction initiatives and profitability in these reporting units have been consistent with our estimated operating plan and previous cash flow estimates and we believe that our long term forecasts are still appropriate. We have utilized a consistent methodology with prior years, which leverages a six year discounted cash flow analysis with a terminal year in combination with a comparable company market approach to determine the fair value of our reporting units.
Included in the following table are the major categories of assets measured at fair value on a non-recurring basis as of December 29, 2012 and December 31, 2011, along with the impairment loss recognized on the fair value measurement during the period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in Active Markets for Identical Assets or Liabilities
|
|
|
Significant Other Observable Inputs
|
|
|
Significant Unobservable Inputs
|
|
|
|
|
|
Quarter Ended
December 29, 2012 Impairment Loss
|
|
Indefinite-lived trademarks
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
220 |
|
|
$ |
220 |
|
|
$ |
— |
|
Goodwill
|
|
|
— |
|
|
|
— |
|
|
|
1,642 |
|
|
|
1,642 |
|
|
|
— |
|
Definite lived intangible assets
|
|
|
— |
|
|
|
— |
|
|
|
758 |
|
|
|
758 |
|
|
|
— |
|
Property, plant, and equipment
|
|
|
— |
|
|
|
— |
|
|
|
1,223 |
|
|
|
1,223 |
|
|
|
— |
|
Total
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
3,843 |
|
|
$ |
3,843 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in Active Markets for Identical Assets or Liabilities
|
|
|
Significant Other Observable Inputs
|
|
|
Significant Unobservable Inputs
|
|
|
|
|
|
Quarter Ended December 31, 2011 Impairment Loss
|
|
Indefinite-lived trademarks
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
220 |
|
|
$ |
220 |
|
|
$ |
— |
|
Goodwill
|
|
|
— |
|
|
|
— |
|
|
|
1,592 |
|
|
|
1,592 |
|
|
|
— |
|
Definite lived intangible assets
|
|
|
— |
|
|
|
— |
|
|
|
843 |
|
|
|
843 |
|
|
|
17 |
|
Property, plant, and equipment
|
|
|
— |
|
|
|
— |
|
|
|
1,227 |
|
|
|
1,227 |
|
|
|
2 |
|
Total
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
3,882 |
|
|
$ |
3,882 |
|
|
$ |
19 |
|
Valuation of Property, Plant and Equipment and Definite Lived Intangible Assets
The Company periodically realigns their manufacturing operations which results in facilities being closed and shut down and equipment transferred to other facilities or equipment being scrapped. The Company utilizes appraised values to corroborate the fair value of the facilities and has utilized a scrap value based on prior facility shut downs to estimate the fair value of the equipment, which has approximated the actual value that was received. When impairment indicators exist, the Company will also perform an undiscounted cash flow analysis to determine the recoverability of the Company’s long lived assets. The Company did not have any write-downs to their property, plant,
and or definite lived intangible assets for the quarterly period ended December 29, 2012. The Company wrote-down their property, plant, and equipment with a carrying value of $1,229 million to its fair value of $1,227 million, which resulted in an impairment charge of $2 million for the quarterly period ended December 31, 2011. The Company also wrote-down their definite lived intangible assets with a carrying value of $860 million to their fair value of $843 million, which resulted in an impairment charge of $17 million for the quarterly period ended December 31, 2011.
8. Income Taxes
The effective tax rate from continuing operations was 32% and 38% for the quarterly periods ended December 29, 2012 and December 31, 2011, respectively. A reconciliation of income tax benefit, computed at the federal statutory rate, to income tax benefit, as provided for in the financial statements, is as follows:
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit computed at statutory rate
|
|
$ |
(5 |
) |
|
$ |
(18 |
) |
State income tax benefit, net of federal taxes
|
|
|
— |
|
|
|
(2 |
) |
Change in valuation allowance
|
|
|
— |
|
|
|
1 |
|
Other
|
|
|
— |
|
|
|
— |
|
Income tax benefit
|
|
$ |
(5 |
) |
|
$ |
(19 |
) |
9. Operating Segments
Berry’s operations are organized into four reportable segments: Rigid Open Top, Rigid Closed Top, Engineered Materials, and Flexible Packaging. The Company has manufacturing and distribution centers in the United States, Canada, Mexico, Belgium, Australia, Germany, Brazil, Malaysia, and India. The North American operation represents 96% of the Company’s net sales, 98% of total long-lived assets, and 99% of the total assets. Selected information by reportable segment is presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
Net sales:
|
|
|
|
|
|
|
Rigid Open Top
|
|
$ |
259 |
|
|
$ |
287 |
|
Rigid Closed Top
|
|
|
313 |
|
|
|
347 |
|
Rigid Packaging
|
|
$ |
572 |
|
|
$ |
634 |
|
Engineered Materials
|
|
|
325 |
|
|
|
328 |
|
Flexible Packaging
|
|
|
175 |
|
|
|
175 |
|
Total net sales
|
|
$ |
1,072 |
|
|
$ |
1,137 |
|
Operating income (loss):
|
|
|
|
|
|
|
|
|
Rigid Open Top
|
|
$ |
27 |
|
|
$ |
31 |
|
Rigid Closed Top
|
|
|
18 |
|
|
|
3 |
|
Rigid Packaging
|
|
$ |
45 |
|
|
$ |
34 |
|
Engineered Materials
|
|
|
24 |
|
|
|
2 |
|
Flexible Packaging
|
|
|
(1 |
) |
|
|
(7 |
) |
Total operating income
|
|
$ |
68 |
|
|
$ |
29 |
|
Depreciation and amortization:
|
|
|
|
|
|
|
|
|
Rigid Open Top
|
|
$ |
23 |
|
|
$ |
22 |
|
Rigid Closed Top
|
|
|
32 |
|
|
|
35 |
|
Rigid Packaging
|
|
$ |
55 |
|
|
$ |
57 |
|
Engineered Materials
|
|
|
18 |
|
|
|
17 |
|
Flexible Packaging
|
|
|
14 |
|
|
|
15 |
|
Total depreciation and amortization
|
|
$ |
87 |
|
|
$ |
89 |
|
|
|
|
|
|
|
|
Total assets:
|
|
|
|
|
|
|
Rigid Open Top
|
|
$ |
1,772 |
|
|
$ |
1,773 |
|
Rigid Closed Top
|
|
|
1,931 |
|
|
|
1,959 |
|
Rigid Packaging |
|
$ |
3,703 |
|
|
$ |
3,732 |
|
Engineered Materials
|
|
|
840 |
|
|
|
873 |
|
Flexible Packaging
|
|
|
507 |
|
|
|
501 |
|
Total assets
|
|
$ |
5,050 |
|
|
$ |
5,106 |
|
Goodwill:
|
|
|
|
|
|
|
|
|
Rigid Open Top
|
|
$ |
681 |
|
|
$ |
681 |
|
Rigid Closed Top
|
|
|
832 |
|
|
|
832 |
|
Rigid Packaging
|
|
$ |
1,513 |
|
|
$ |
1,513 |
|
Engineered Materials
|
|
|
89 |
|
|
|
73 |
|
Flexible Packaging
|
|
|
40 |
|
|
|
40 |
|
Total goodwill
|
|
$ |
1,642 |
|
|
$ |
1,626 |
|
10. 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. BP Parallel, LLC is the entity that we established to buyback debt securities of Berry Plastics Group, Inc. and Berry Plastics Corporation. 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 Statements of Operations
|
|
Quarterly Period End December 29, 2012
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Guarantor
Subsidiaries
|
|
|
Non-
Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Total
|
|
Net sales
|
|
$ |
— |
|
|
$ |
133 |
|
|
$ |
849 |
|
|
$ |
90 |
|
|
$ |
— |
|
|
$ |
1,072 |
|
Cost of sales
|
|
|
— |
|
|
|
137 |
|
|
|
694 |
|
|
|
64 |
|
|
|
— |
|
|
|
895 |
|
Selling, general and administrative expenses
|
|
|
— |
|
|
|
10 |
|
|
|
58 |
|
|
|
9 |
|
|
|
— |
|
|
|
77 |
|
Amortization of intangibles
|
|
|
— |
|
|
|
3 |
|
|
|
23 |
|
|
|
1 |
|
|
|
— |
|
|
|
27 |
|
Restructuring and impairment charges, net
|
|
|
— |
|
|
|
— |
|
|
|
5 |
|
|
|
— |
|
|
|
— |
|
|
|
5 |
|
Operating income (loss)
|
|
|
— |
|
|
|
(17 |
) |
|
|
69 |
|
|
|
16 |
|
|
|
— |
|
|
|
68 |
|
Debt extinguishment
|
|
|
— |
|
|
|
16 |
|
|
|
- |
|
|
|
— |
|
|
|
— |
|
|
|
16 |
|
Other income
|
|
|
— |
|
|
|
(3 |
) |
|
|
- |
|
|
|
— |
|
|
|
— |
|
|
|
(3 |
) |
Interest expense, net
|
|
|
11 |
|
|
|
9 |
|
|
|
55 |
|
|
|
(31 |
) |
|
|
26 |
|
|
|
70 |
|
Equity in net income of subsidiaries
|
|
|
4 |
|
|
|
(62 |
) |
|
|
— |
|
|
|
— |
|
|
|
58 |
|
|
|
— |
|
Net income (loss) before income taxes
|
|
|
(15 |
) |
|
|
23 |
|
|
|
14 |
|
|
|
47 |
|
|
|
(84 |
) |
|
|
(15 |
) |
Income tax expense (benefit)
|
|
|
(5 |
) |
|
|
10 |
|
|
|
(1 |
) |
|
|
— |
|
|
|
(9 |
) |
|
|
(5 |
) |
Net income (loss)
|
|
$ |
(10 |
) |
|
$ |
13 |
|
|
$ |
15 |
|
|
$ |
47 |
|
|
$ |
(75 |
) |
|
$ |
(10 |
) |
Comprehensive income (loss)
|
|
$ |
(10 |
) |
|
$ |
14 |
|
|
$ |
15 |
|
|
$ |
49 |
|
|
$ |
(75 |
) |
|
$ |
(7 |
) |
Consolidating Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow from Operating Activities
|
|
$ |
— |
|
|
$ |
(21 |
) |
|
$ |
95 |
|
|
$ |
13 |
|
|
$ |
— |
|
|
$ |
87 |
|
Cash Flow from Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property, plant, and equipment
|
|
|
— |
|
|
|
(2 |
) |
|
|
(42 |
) |
|
|
(1 |
) |
|
|
— |
|
|
|
(45 |
) |
Proceeds from disposal of assets
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
Investment in Parent
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(21 |
) |
|
|
21 |
|
|
|
— |
|
(Contributions) distributions to/from subsidiaries
|
|
|
(442 |
) |
|
|
421 |
|
|
|
— |
|
|
|
— |
|
|
|
21 |
|
|
|
— |
|
Intercompany advances (repayments)
|
|
|
— |
|
|
|
46 |
|
|
|
— |
|
|
|
— |
|
|
|
(46 |
) |
|
|
— |
|
Investment in Issuer debt securities
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Acquisition of business net of cash acquired
|
|
|
— |
|
|
|
— |
|
|
|
(20 |
) |
|
|
— |
|
|
|
— |
|
|
|
(20 |
) |
Net cash used in investing activities
|
|
|
(442 |
) |
|
|
465 |
|
|
|
(60 |
) |
|
|
(22 |
) |
|
|
(4 |
) |
|
|
(63 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow from Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from long—term debt
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
1 |
|
Proceeds from issuance of common stock
|
|
|
4 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4 |
|
Proceeds from initial public stock offering
|
|
|
438 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
438 |
|
Repayment of long—term debt
|
|
|
— |
|
|
|
(501 |
) |
|
|
— |
|
|
|
— |
|
|
|
(21 |
) |
|
|
(522 |
) |
Changes in intercompany balances
|
|
|
— |
|
|
|
— |
|
|
|
(34 |
) |
|
|
(12 |
) |
|
|
46 |
|
|
|
— |
|
Contribution from Issuer
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
21 |
|
|
|
(21 |
) |
|
|
— |
|
Net cash provided by (used in) financing activities
|
|
|
442 |
|
|
|
(501 |
) |
|
|
(34 |
) |
|
|
10 |
|
|
|
4 |
|
|
|
(79 |
) |
Net increase in cash and cash equivalents
|
|
|
— |
|
|
|
(57 |
) |
|
|
1 |
|
|
|
1 |
|
|
|
— |
|
|
|
(55 |
) |
Cash and cash equivalents at beginning of period
|
|
|
— |
|
|
|
66 |
|
|
|
— |
|
|
|
21 |
|
|
|
— |
|
|
|
87 |
|
Cash and cash equivalents at end of period
|
|
$ |
— |
|
|
$ |
9 |
|
|
$ |
1 |
|
|
$ |
22 |
|
|
$ |
— |
|
|
$ |
32 |
|
|
|
Quarterly Period End December 31, 2011
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Guarantor
Subsidiaries
|
|
|
Non—
Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Total
|
|
Net sales
|
|
$ |
— |
|
|
$ |
145 |
|
|
$ |
908 |
|
|
$ |
84 |
|
|
$ |
— |
|
|
$ |
1,137 |
|
Cost of sales
|
|
|
— |
|
|
|
149 |
|
|
|
776 |
|
|
|
60 |
|
|
|
— |
|
|
|
985 |
|
Selling, general and administrative expenses
|
|
|
— |
|
|
|
10 |
|
|
|
54 |
|
|
|
8 |
|
|
|
— |
|
|
|
72 |
|
Amortization of intangibles
|
|
|
— |
|
|
|
2 |
|
|
|
26 |
|
|
|
— |
|
|
|
— |
|
|
|
28 |
|
Restructuring and impairment charges, net
|
|
|
— |
|
|
|
— |
|
|
|
23 |
|
|
|
— |
|
|
|
— |
|
|
|
23 |
|
Operating income (loss)
|
|
|
— |
|
|
|
(16 |
) |
|
|
29 |
|
|
|
16 |
|
|
|
— |
|
|
|
29 |
|
Other income
|
|
|
— |
|
|
|
(4 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4 |
) |
Interest expense, net
|
|
|
12 |
|
|
|
11 |
|
|
|
65 |
|
|
|
(24 |
) |
|
|
19 |
|
|
|
83 |
|
Equity in net income of subsidiaries
|
|
|
38 |
|
|
|
(3 |
) |
|
|
— |
|
|
|
— |
|
|
|
(35 |
) |
|
|
— |
|
Net income (loss) before income taxes
|
|
|
(50 |
) |
|
|
(20 |
) |
|
|
(36 |
) |
|
|
40 |
|
|
|
16 |
|
|
|
(50 |
) |
Income tax expense (benefit)
|
|
|
(19 |
) |
|
|
(8 |
) |
|
|
— |
|
|
|
1 |
|
|
|
7 |
|
|
|
(19 |
) |
Net income (loss)
|
|
$ |
(31 |
) |
|
$ |
(12 |
) |
|
$ |
(36 |
) |
|
$ |
39 |
|
|
$ |
9 |
|
|
$ |
(31 |
) |
Comprehensive income (loss)
|
|
$ |
(31 |
) |
|
$ |
(12 |
) |
|
$ |
(36 |
) |
|
$ |
39 |
|
|
$ |
9 |
|
|
$ |
(31 |
) |
Consolidating Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow from Operating Activities
|
|
$ |
— |
|
|
$ |
(3 |
) |
|
$ |
83 |
|
|
$ |
9 |
|
|
$ |
— |
|
|
$ |
89 |
|
Cash Flow from Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property, plant, and equipment
|
|
|
— |
|
|
|
(4 |
) |
|
|
(40 |
) |
|
|
(1 |
) |
|
|
— |
|
|
|
(45 |
) |
Proceeds from disposal of assets
|
|
|
— |
|
|
|
— |
|
|
|
8 |
|
|
|
— |
|
|
|
— |
|
|
|
8 |
|
Investment in Parent
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4 |
) |
|
|
4 |
|
|
|
— |
|
(Contributions) distributions to/from subsidiaries
|
|
|
— |
|
|
|
(4 |
) |
|
|
— |
|
|
|
— |
|
|
|
4 |
|
|
|
— |
|
Intercompany advances (repayments)
|
|
|
— |
|
|
|
63 |
|
|
|
— |
|
|
|
— |
|
|
|
(63 |
) |
|
|
— |
|
Investment in Issuer debt securities
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Acquisition of business net of cash acquired
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net cash used in investing activities
|
|
|
— |
|
|
|
55 |
|
|
|
(32 |
) |
|
|
(5 |
) |
|
|
(55 |
) |
|
|
(37 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow from Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from long—term debt
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Equity contributions
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Repayment of long—term debt
|
|
|
— |
|
|
|
(61 |
) |
|
|
— |
|
|
|
— |
|
|
|
(4 |
) |
|
|
(65 |
) |
Changes in intercompany balances
|
|
|
— |
|
|
|
— |
|
|
|
(55 |
) |
|
|
(8 |
) |
|
|
63 |
|
|
|
— |
|
Contribution from Issuer
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4 |
|
|
|
(4 |
) |
|
|
— |
|
Deferred financing costs
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net cash provided by (used in) financing activities
|
|
|
— |
|
|
|
(61 |
) |
|
|
(55 |
) |
|
|
(4 |
) |
|
|
55 |
|
|
|
(65 |
) |
Net increase in cash and cash equivalents
|
|
|
— |
|
|
|
(9 |
) |
|
|
(4 |
) |
|
|
— |
|
|
|
— |
|
|
|
(13 |
) |
Cash and cash equivalents at beginning of period
|
|
|
— |
|
|
|
20 |
|
|
|
5 |
|
|
|
17 |
|
|
|
— |
|
|
|
42 |
|
Cash and cash equivalents at end of period
|
|
$ |
— |
|
|
$ |
11 |
|
|
$ |
1 |
|
|
$ |
17 |
|
|
$ |
— |
|
|
$ |
29 |
|
Condensed Supplemental Consolidated Balance Sheet
|
|
December 29, 2012
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Guarantor
Subsidiaries
|
|
|
Non—
Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Total
|
|
Current assets
|
|
|
185 |
|
|
|
158 |
|
|
|
725 |
|
|
|
137 |
|
|
|
(10 |
) |
|
|
1,195 |
|
Intercompany receivable
|
|
|
241 |
|
|
|
3,749 |
|
|
|
— |
|
|
|
— |
|
|
|
(3,990 |
) |
|
|
— |
|
Property, plant and equipment, net
|
|
|
— |
|
|
|
109 |
|
|
|
1,037 |
|
|
|
77 |
|
|
|
— |
|
|
|
1,223 |
|
Other noncurrent assets
|
|
|
697 |
|
|
|
884 |
|
|
|
2,346 |
|
|
|
788 |
|
|
|
(2,083 |
) |
|
|
2,632 |
|
Total assets
|
|
$ |
1,123 |
|
|
$ |
4,900 |
|
|
$ |
4,108 |
|
|
$ |
1,002 |
|
|
$ |
(6,083 |
) |
|
$ |
5,050 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
135 |
|
|
|
254 |
|
|
|
297 |
|
|
|
43 |
|
|
|
(16 |
) |
|
|
713 |
|
Intercompany payable
|
|
|
— |
|
|
|
— |
|
|
|
3,869 |
|
|
|
121 |
|
|
|
(3,990 |
) |
|
|
— |
|
Noncurrent liabilities
|
|
|
1,301 |
|
|
|
4,103 |
|
|
|
118 |
|
|
|
188 |
|
|
|
(1,060 |
) |
|
|
4,650 |
|
Equity (deficit)
|
|
|
(313 |
) |
|
|
543 |
|
|
|
(176 |
) |
|
|
650 |
|
|
|
(1,017 |
) |
|
|
(313 |
) |
Total liabilities and equity (deficit)
|
|
$ |
1,123 |
|
|
$ |
4,900 |
|
|
$ |
4,108 |
|
|
$ |
1,002 |
|
|
$ |
(6,083 |
) |
|
$ |
5,050 |
|
|
|
September 29, 2012
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Guarantor
Subsidiaries
|
|
|
Non—
Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Total
|
|
Current assets
|
|
|
120 |
|
|
|
226 |
|
|
|
759 |
|
|
|
139 |
|
|
|
(11 |
) |
|
|
1,233 |
|
Intercompany receivable
|
|
|
243 |
|
|
|
3,800 |
|
|
|
74 |
|
|
|
— |
|
|
|
(4,117 |
) |
|
|
— |
|
Property, plant and equipment, net
|
|
|
— |
|
|
|
113 |
|
|
|
1,023 |
|
|
|
80 |
|
|
|
— |
|
|
|
1,216 |
|
Other noncurrent assets
|
|
|
262 |
|
|
|
809 |
|
|
|
2,353 |
|
|
|
749 |
|
|
|
(1,516 |
) |
|
|
2,657 |
|
Total assets
|
|
$ |
625 |
|
|
$ |
4,948 |
|
|
$ |
4,209 |
|
|
$ |
968 |
|
|
$ |
(5,644 |
) |
|
$ |
5,106 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
18 |
|
|
|
278 |
|
|
|
315 |
|
|
|
48 |
|
|
|
(13 |
) |
|
|
646 |
|
Intercompany payable
|
|
|
— |
|
|
|
— |
|
|
|
3,966 |
|
|
|
151 |
|
|
|
(4,117 |
) |
|
|
— |
|
Noncurrent liabilities
|
|
|
1,059 |
|
|
|
4,579 |
|
|
|
119 |
|
|
|
8 |
|
|
|
(853 |
) |
|
|
4,912 |
|
Equity (deficit)
|
|
|
(452 |
) |
|
|
91 |
|
|
|
(191 |
) |
|
|
761 |
|
|
|
(661 |
) |
|
|
(452 |
) |
Total liabilities and equity (deficit)
|
|
$ |
625 |
|
|
$ |
4,948 |
|
|
$ |
4,209 |
|
|
$ |
968 |
|
|
$ |
(5,644 |
) |
|
$ |
5,106 |
|
11. Contingencies and Commitments
The Company is party to various legal proceedings involving routine claims which are incidental to the business. Altho