2015
ANNUAL REPORT
Global Leader in Innovative Packaging and Engineered Specialty Materials
FINANCIAL HIGHLIGHTS*
FISCAL YEARS ENDED
SEPTEMBER 26, 2015
SEPTEMBER 27, 2014 % CHANGE
Net Sales
Operating EBITDA
Adjusted EBITDA
Adjusted Free Cash Flow
$4,881
$815
$820
$436
$4,958
$785
$830
$302
-1.6%
3.8%
-1.2%
44.4%
NET SALES
OPERATING EBITDA
$4,958
$4,881
$4,766
$4,647
$4,561
$900
$800
$700
$656
$771
$775
$785
$815
$5,000
$4,800
$4,600
$4,400
$4,200
$4,000
‘11
‘12
‘13
‘14
‘15
ADJUSTED EBITDA
$900
$800
$750
$803
$790
$830
$820
$700
$600
$500
$400
$600
$500
$400
$500
$400
$300
$200
$100
$0
‘11
‘12
‘13
‘14
‘15
ADJUSTED FREE CASH FLOW
$436
$279
$238
$302
$172
‘11
‘12
‘13
‘14
‘15
‘11
‘12
‘13
‘14
‘15
*In millions except stock performance data. Operating EBITDA, adjusted EBITDA, and adjusted free cash flow are non-GAAP financial measures.
See reconciliation located within this document.
$250
$200
$150
$100
$50
STOCK PERFORMANCE**
Berry Plastics Group, Inc.
Dow Jones US Containers
& Packaging Index
S&P 500 Index
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
**Total cumulative return based on $100 invested at beginning of the period vs. the S&P 500 and DJ US Containers & Packaging.
Assumes reinvestment of dividends.
LETTER TO OUR SHAREHOLDERS
Dear Fellow Shareholders,
F iscal 2015 was another strong year for Berry. During the year we achieved record
operating EBITDA and adjusted free cash for any f iscal year in the Company’s
history. Specif ically in f iscal 2015 we delivered operating EBITDA of $815 million and
adjusted free cash f low of $436 million, all despite continued muted demand in
North America for food packaging. The value of Berry’s stock rose over 20% during
f iscal year 2015. While all of us at Berry are proud of these accomplishments, in
the end they are a ref lection on the soundness of our strategies and the result of a
relentless focus on execution by our dedicated employees.
Two of the hallmarks of Berry have been stability and predictability. Since the
Company went public in 2012, we have adhered consistently to a four-point
strategic plan to increase shareholder value: grow organically through innovation,
strengthen our balance sheet through substantial cash generation, grow
internationally, and continue to execute on value enhancing acquisitions. By
executing successfully on these strategies Berry’s share price (as of the end of f iscal
2015) has increased by 88% since our IPO.
Our products are primarily used in consumer staple applications for personal care, healthcare, food, and
beverage where demand is highly consistent. In these markets, we participate exclusively in plastic substrates,
which we believe is the most attractive and fastest growing material. While we have many competitors in
individual categories such as bottles, rigid containers, closures, f lexible f ilms or non-woven plastic f ibers, no
one company competes against the breadth or scale of Berry’s product offerings. As one of the largest and
most diversif ied processors of plastic resin in the world, our scale in resin sourcing, capital acquisition, and
manufacturing gives us a competitive cost and logistics advantage.
Throughout our history we have completed 40 acquisitions that have fueled the growth of the Company. Our
ability to identify, acquire, and integrate value adding acquisitions remains a core strength for Berry. In August
2015, we announced our intention to acquire AVINTIV Inc. (“AVINTIV”), a global marketer of specialty materials
used in infection prevention, personal care, and high-performance solutions. Both Berry and AVINTIV hold
industry leading positions in their respective spaces which serve many complementary customers, technologies,
and product offerings. The acquisition provides synergy opportunities through procurement of polyolef in resin,
elimination of redundant costs, and longer-term revenue growth.
We enter 2016 with enthusiasm and conf idence in our ability to grow with our customers and deliver increasing
value to our shareholders. While we have increased our net debt to adjusted EBITDA modestly with the
AVINTIV acquisition, through our strengthened balance sheet and consistent free cash f low generation, our
goal is to reduce the ratio by 0.5 per year to reside in a 3-4 range. As we start the new f iscal year we have
taken advantage of the AVINTIV acquisition to reorganize and streamline Berry into three focused operating
businesses: Health, Hygiene, and Specialties; Consumer Packaging; and Engineered Materials. In addition, the
dramatic reduction in global oil and energy prices, coupled with our increased global presence, positions us well
for lower raw material and conversion costs and can create an environment where plastic products should be
more competitive with substrates like glass, metal, and paper.
Berry will continue to take the necessary, proactive steps to remain competitive and a leader in innovative
packaging and engineered specialty materials through a relentless focus on building and strengthening our
competitive advantages. I am conf ident that the people at Berry will continue to drive our results and achieve
our goals. Thank you for your continued interest in and support of Berry.
Jon Rich
Berry Plastics Group, Inc.
Chairman
Chief Executive Officer
2015 ACCOMPLISHMENTS
$436 million
Adjusted Free Cash Flow
$637 million
Cash Flow from Operations
$116 million
Over Original Guidance
$107 million Improvement
from Fiscal 2014
16.7%
Operating EBITDA Margin
4.2x
Net Debt to Adj. EBITDA
90bps Improvement
from Fiscal 2014
0.4x Reduction
from Fiscal 2014
ENHANCING SHAREHOLDER RETURNS
We have a clear goal at Berry — continue to take
the necessary steps to enhance shareholder
value. Our strong focus of using substantial free
cash f low to lower our debt is our top priority. We
will continue to enhance organic growth through
product innovation and redesign.
With our top priority being debt reduction, our
strategy related to merger and acquisitions
remains a disciplined, opportunistic approach.
We feel that with these strategies in hand we will
be able to exceed expectations and drive future
shareholder value.
DIRECTORS
(As of January 13, 2016)
B. Evan Bayh
Senior Advisor of Apollo Global
Management and Partner at
McGuireWoods, LLP
Joined 2011
Jonathan F. Foster
Founding and Managing
Director of Current Capital LLC
Idalene F. Kesner
Dean of Indiana University’s
Kelley School of Business
Jonathan D. Rich
Chairman and
Chief Executive Officer
Joined 2014
Joined 2014
Joined 2010
Carl J. (Rick)
Rickertsen
Managing Partner of
Pine Creek Partners
Joined 2013
Ronald S. Rolfe
Former Partner of the Litigation
Dept. of Cravath
Robert V. Seminara
Member of Apollo
Global Management
Joined 2013
Joined 2006
Robert A. Steele
Former Vice Chairman of Health
Care at Proctor & Gamble™
Joined 2014
Stephen E. Sterrett
Former Senior EVP and CFO
of Simon Property Group
Joined 2015
EXECUTIVE OFFICERS
(As of January 13, 2016)
Jonathan D. Rich
Chairman
Chief Executive Officer
Thomas E. Salmon
President
Consumer Packaging Division
James M. Till
Executive Vice President
Controller
Mark W. Miles
Chief Financial Officer &
Treasurer
Scott M. Tracey
President
Health, Hygiene, & Specialties Division
Curt L. Begle
President
Engineered Materials Division
Jason K. Greene
Executive Vice President
General Counsel & Secretary
NON-GAAP FINANCIAL MEASURES*
Operating EBITDA, adjusted EBITDA, and adjusted free cash f low, as presented in this document,
are supplemental financial measures that are not required by, or presented in accordance with,
generally accepted accounting principles in the United States (“GAAP”). Reconciliations of such
measures to GAAP financial measures are provided below. Investors are urged to consider carefully
the comparable GAAP measures and the reconciliations to those measures provided. For further
information see the accompanying Form 10-K.
U.S. GAAP Operating Income
Add: depreciation and amortization
Add: restructuring and impairment
Add: business optimization and other expense
FISCAL
2011
2012
2013
2014
2015
$42
344
221
49
$325
$386
$316
$408
355
341
358
350
31
60
14
34
30
81
13
44
Operating EBITDA
$656
$771
$775
$785
$815
Add: pro forma acquisitions
Add: unrealized cost savings
55
39
6
26
2
13
18
27
-
5
Adjusted EBITDA
$750
$803
$790
$830
$820
FISCAL
2011
2012
2013
2014
2015
Cash F low from operating activities
$327
$479
$464
$530
$637
Additions to property, plant, and equipment, net
(155)
(200)
(221)
(196)
(162)
Tax receivable agreement payment
0
0
(5)
(32)
(39)
Adjusted Free Cash F low
$172
$279
$238
$302
$436
*MEASUREMENTS ARE IN MILLIONS
Fiscal 2015 Annual Report on Form 10-K
Year ended September 26, 2015
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the fiscal year ended September 26, 2015
☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File Number 001-35672
or
BERRY PLASTICS GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction
of incorporation or organization)
101 Oakley Street
Evansville, Indiana
(Address of principal executive offices)
20-5234618
(IRS employer
identification number)
47710
(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
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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 ☒ 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 ☒ 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 ☐
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 ☒
The aggregate market value of the common stock of the registrant held by non-affiliates was approximately $4.2 billion as of March 27, 2015, the last
business day of the registrant’s most recently completed second fiscal quarter. This amount excludes shares of the registrant’s common stock held by
current executive officers, directors, and affiliates whose ownership did not exceeded 5% as of such date. The aggregate market value was computed
using the $35.43 closing price per share for such stock on the New York Stock Exchange on such date.
Class
Outstanding at November 23, 2015
Common Stock, $.01 par value per share
120.0 million shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Berry Plastics Group, Inc.’s Proxy Statement for its 2016 Annual Meeting of Stockholders are incorporated by reference into Part
III of this Annual Report on Form 10-K.
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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Form 10-K 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, or our financial condition, 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-K.
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 including the diversion of
management time on acquisition-related issues and our ability to promptly and effectively integrate our businesses
with those of acquisitions and achieve the synergies and value creation contemplated;
reliance on unpatented know-how and trade secrets;
increases in the cost of compliance with laws and regulations, including environmental, safety, production and
product laws and regulations;
risks related to disruptions in the overall economy and the financial markets that 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;
the other factors discussed 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-K 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.
1
TABLE OF CONTENTS
FORM 10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 26, 2015
PART I
Item 1.
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1A. RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B. UNRESOLVED STAFF COMMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3.
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4. MINE SAFETY DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART II
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES . . . . . . . . . . . . . . . . . . .
Item 6
SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK . . . . . . . . . .
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
Item 9.
FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9A. CONTROLS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . . . . . . . . . . . . .
Item 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART IV
Page
3
7
12
12
12
12
12
13
14
25
26
27
27
27
27
28
28
28
28
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES . . . . . . . . . . . . . . . . . . . . . . . . .
28
2
Item 1.
BUSINESS
(In millions of dollars, except as otherwise noted)
General
Berry Plastics Group, Inc. (“Berry,” “we,” 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 specialty closures, prescription vials, specialty films,
adhesives, corrosion protection materials, as well as drink cups, thin-wall containers, and bottles. We sell our products
predominantly into stable, consumer-oriented end-markets, such as healthcare, personal care, and food and beverage.
We believe that we have created one of the largest product libraries in our industry, allowing us to be a comprehensive
solution provider to our customers. Our customers consist of a diverse mix of leading global, national, mid-sized
regional and local specialty businesses. The size and scope of our customer network allows us to introduce new
products we develop or acquire to a vast audience that is familiar with our brand. In fiscal 2015, no single customer
represented more than approximately 2% of net sales and our top ten customers represented 16% of net sales. We
believe our manufacturing processes and our ability to leverage our scale to reduce expenses on items, such as raw
materials, position us as a low-cost manufacturer relative to our competitors.
Through November 2015, our business was organized into four operating divisions: Rigid Open Top, Rigid Closed
Top, (which together make up our Rigid Packaging business), Engineered Materials, and Flexible Packaging.
Additional financial information about our business segments is provided in “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” and the “Notes to Consolidated Financial Statements,” which are
included elsewhere in this Form 10-K.
In November 2015 the Company reorganized into three operating segments: Health, Hygiene and Specialties,
Consumer Packaging, and Engineered Materials. The Health, Hygiene and Specialties segment will include the recently
acquired Avintiv business and personal care films and international business that historically reported in our Flexible
Packaging segment. The Consumer Packaging segment will consist of our historical Rigid Open Top segment, Rigid
Closed Top segment, the food and consumer films business that historically reported in our Flexible Packaging
segment, and the custom shrink films business that was historically reported in our Engineered Materials segment. The
Engineered Material segment will include the old Engineered Material segment, excluding the custom shrink films
business, and the converter films business that was historically reported in our Flexible Packaging segment. Beginning
with our results for the first quarter of fiscal 2016, we will report results based on our new operating segment structure.
Recent Acquisitions
Rexam Healthcare Containers and Closures
In June 2014, the Company acquired Rexam’s Healthcare Containers and Closures business (“C&C”) for a purchase
price of $133 million, net of cash acquired. The C&C business produces bottles, closures, and specialty products for
pharmaceutical and over-the-counter healthcare applications. The C&C acquisition has been accounted for under the
purchase method of accounting, and accordingly, the purchase price has been allocated to the identifiable assets and
liabilities based on their fair values at the acquisition date. The acquired assets and assumed liabilities consisted of
working capital of $32 million, property and equipment of $85 million, non-current deferred tax asset of $3 million,
intangible assets of $9 million, goodwill of $7 million, and other long-term liabilities of $3 million.
AVINTIV Inc.
In October 2015, the Company acquired 100% of the capital stock of Avintiv for a purchase price of approximately
$2.3 billion 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. With 23 locations in 14 countries, an employee base of over 4,500 people, and the broadest
range of process technologies in the industry, Avintiv’s strategically located manufacturing facilities position it as a
global supplier to many of the same leading consumer and industrial product manufacturers that Berry supplies and
utilize similar key raw materials as Berry’s existing business. 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.
3
Recent Developments
Revolving Line of Credit
In May 2015, the Company amended the credit agreement relating to its existing $650 million secured revolving credit
facility to extend the maturity date of the revolving credit facility from June 2016 to May 2020 and to reduce interest
margins and certain commitment fees.
5⅛% Second Priority Senior Secured Notes
In June 2015, the Company issued $700 million of 5⅛% second priority senior secured notes due July 2023. Interest on
the 5⅛% second priority senior secured notes is due semi-annually on January 15 and July 15. Proceeds from the
issuance and existing liquidity were used to satisfy and discharge all of the outstanding 9¾% second priority senior
secured notes. The Company recognized a $94 million loss on extinguishment of debt, including $83 million of early
tender and redemption costs and an $11 million write-off of deferred financing fees.
Interest Rate Swap
In September 2015, the Company entered into an interest rate swap transaction to protect $1 billion of outstanding
variable rate term loan debt from future interest rate volatility. The agreement swapped the greater of a three-month
variable LIBOR contract or 1.00% for a fixed annual rate of 1.7185%, with an effective date in December 2015 and
expiration in June 2019.
Product Overview
Rigid Packaging
Our Rigid Packaging business primarily includes the following product groups:
Containers. We manufacture a collection of nationally branded container products which range from four ounces to
five gallons and are offered in various styles with accompanying lids, bails and handles, some of which we produce, as
well as a wide array of decorating options.
Foodservice. We believe we are one of the largest providers of large size thermoformed polypropylene (“PP”) and
injection-molded plastic drink cups in the United States. We manufacture plastic cups that range in size from 12 to 64
ounces primarily for quick service and family dining restaurants, convenience stores, stadiums and retail stores.
Closures and Overcaps. We believe we are a leading producer of closures and overcaps across several of our product
lines, including continuous-thread and child-resistant closures, as well as aerosol overcaps. We sell our closures into
numerous end markets, including household chemical, healthcare, food and beverage, and personal care.
Bottles and Prescription Containers. Our bottle and prescription container businesses target markets similar to our
closure business. We believe we are a leader in various food and beverage, vitamin and nutritional markets, as well as
the prescription container market.
Tubes. We offer a complete line of extruded and laminate tubes in a wide variety of sizes. We believe we are one of
the largest suppliers of extruded plastic squeeze tubes in the United States. The majority of our tubes are sold in the
personal care market. We also sell our tubes into the pharmaceutical and household chemical markets.
Engineered Materials
The Engineered Materials business primarily includes the following product groups:
Corrosion Protection Products. We believe we are a leading global producer of anti-corrosion products to
infrastructure, rehabilitation and new pipeline projects throughout the world. These products are used in oil, gas, and
water supply and construction applications. Our customers primarily include contractors managing discrete
construction projects around the world as well as distributors and applicators.
Tape Products. We believe we are a leading North American manufacturer of cloth and foil tape products. Other tape
products include high-quality, high-performance liners of splicing and laminating tapes, flame-retardant tapes,
vinyl-coated and carton sealing tapes, electrical, double-faced cloth, masking, mounting, OEM, and medical and
specialty tapes. Tape products are sold primarily through distributors and directly to end users for industrial, HVAC,
automotive, construction, and retail market applications.
4
Retail Bags. We sell a diversified portfolio of polyethylene based film products to end users in the retail markets. Our
products include drop cloths and retail trash bags. These products are sold primarily through wholesale outlets,
hardware stores and home centers, paint stores, and mass merchandisers.
PVC Films. We believe we are a world leader in polyvinyl chloride (“PVC”) films offering a broad array of PVC meat
film. Our products are used primarily to wrap fresh meats, poultry, and produce for supermarket applications. In
addition, we offer a line of boxed products for food service and retail sales. We service many of the leading
supermarket chains, club stores, and wholesalers.
Institutional Can Liners. We sell trash-can liners and food bags for offices, restaurants, schools, hospitals, hotels,
municipalities, and manufacturing facilities.
Stretch and Shrink Films. We manufacture both hand and machine-wrap stretch films and custom shrink films, which
are used to prepare products and packages for storage and shipping. We sell stretch and shrink film products to a
diverse mix of end users.
Flexible Packaging
Our Flexible Packaging division consists of high barrier, multilayer film products as well as finished flexible packages
such as pouches and includes various immaterial international operations. The Flexible Packaging division primarily
includes the following product groups:
Personal Care Films. We believe we are a major supplier of component and packaging films used for personal care
hygiene applications predominantly sold in North America and Latin America. The end use applications include
disposable baby diapers, feminine care, adult incontinence, hospital, and tissue and towel products.
Food and Consumer Films. We are a converter of printed bags, pouches, and rollstock. We believe we are a leading
supplier of printed film products for the fresh bakery, tortilla, and frozen vegetable markets. We also manufacture
barrier films used for cereal, cookie, cracker and dry mix packages that are sold directly to food manufactures.
Converter Films. We manufacture specialty coated and laminated products for a wide variety of packaging
applications as well as a wide range of highly specialized, made-to-order film products. The key end markets and
applications for our products include healthcare, industrial and military pouches, roll wrap, multi-wall bags, and fiber
drum packaging.
International. We manufacture a wide range of products predominately serving the global food, healthcare, and
personal care markets.
Marketing, Sales, and Competition
We reach our large and diversified customer base through our regional direct field sales force of dedicated professionals
and the strategic use of distributors. Our regional field sales, production and support staff meet with customers to
understand their needs and improve our product offerings and services. Our scale enables us to dedicate certain sales
and marketing efforts to particular products or customers, when applicable, which enables us to develop expertise that
we believe is valued by our customers. In addition, because we serve common customers across segments, we have the
ability to efficiently utilize our sales and marketing resources to minimize costs.
The major markets in which the Company sells its products are highly competitive. Areas of competition include
service, innovation, quality, and price. This competition is significant as to both the size and the number of competing
firms. Competitors include but are not limited to Silgan, Aptar, Reynolds, AEP, Intertape, 3M, Clopay, Tredegar, and
Bemis.
Research, Product Development and Design
We believe our technology base and research and development support are among the best in the industries we serve.
Many of our customers work in partnership with our technical representatives to develop new, more competitive
products. Our design professionals work directly with our customers to develop new styles and use computer-generated
graphics to enable our customers to visualize the finished product. Expenditures for research and development
activities were $33 million, $32 million, and $28 million in fiscal 2015, 2014 and 2013, respectively.
5
Raw Materials
Our primary raw material is plastic resin. In addition, we use butyl rubber, tackifying resins, chemicals and adhesives,
paper and packaging materials, linerboard, rayon, and foil in various manufacturing processes. These raw materials are
available from multiple sources and in general we purchase from a variety of global suppliers. In certain regions we may
source specific raw materials from a limited number of suppliers or on a sole-source basis. While temporary shortages
of raw materials can occur, we expect to continue to successfully manage raw material supplies without significant
supply interruptions.
Employees
As of the end of the 2015 fiscal year, we employed approximately 16,000 employees with approximately 12% of those
employees being covered by collective bargaining agreements. There are four agreements, representing approximately
7% of employees, due for renegotiation in fiscal 2016. The remaining agreements expire after fiscal year 2016. Our
relations with employees under collective bargaining agreements remain satisfactory and there have been no significant
work stoppages or other labor disputes during the past three years.
Avintiv acquisition — Avintiv has approximately 4,500 employees worldwide. Approximately 52% of these employees
are represented by labor unions or works councils that have entered into separate collective bargaining agreements with
Avintiv. All of these collective bargaining agreements will expire within one year. We believe these employee relations
are satisfactory.
Patents, Trademarks and Other Intellectual Property
We customarily seek patent and trademark protection for our products and brands while seeking to protect our
proprietary know-how. While important to our business in the aggregate, sales of any one individually patented
product are not considered material to any specific segment or the consolidated results.
Environmental Matters and Government Regulation
Our past and present operations and our past and present ownership and operations of real property are subject to
extensive and changing federal, state, local, and foreign environmental laws and regulations pertaining to the discharge
of materials into the environment, handling and disposition of waste, and cleanup of contaminated soil and ground
water, or otherwise relating to the protection of the environment. We believe that we are in substantial compliance with
applicable environmental laws and regulations. However, we cannot predict with any certainty that we will not in the
future incur liability with respect to noncompliance with environmental laws and regulations, contamination of sites
formerly or currently owned or operated by us (including contamination caused by prior owners and operators of such
sites) or the off-site disposal of regulated materials, which could be material.
We may from time to time be required to conduct remediation of releases of regulated materials at our owned or
operated facilities. None of our pending remediation projects are expected to result in material costs. Like any
manufacturer, we are also subject to the possibility that we may receive notices of potential liability in connection with
materials that were sent to third-party recycling, treatment, and/or disposal facilities under the Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended (“CERCLA”), and comparable state
statutes, which impose liability for investigation and remediation of contamination without regard to fault or the
legality of the conduct that contributed to the contamination, and for damages to natural resources. Liability under
CERCLA is retroactive, and, under certain circumstances, liability for the entire cost of a cleanup can be imposed on
any responsible party. We are not aware that any such notices are currently pending which are expected to result in
material costs.
The Food and Drug Administration (“FDA”) regulates the material content of direct-contact food and drug packages,
including certain packages we manufacture pursuant to the Federal Food, Drug and Cosmetics Act. Certain of our
products are also regulated by the Consumer Product Safety Commission (“CPSC”) pursuant to various federal laws,
including the Consumer Product Safety Act and the Poison Prevention Packaging Act. Both the FDA and the CPSC
can require the manufacturer of defective products to repurchase or recall such products and may also impose fines or
penalties on the manufacturer. Similar laws exist in some states, cities and other countries in which we sell our products.
In addition, laws exist in certain states restricting the sale of packaging with certain levels of heavy metals, imposing
6
fines and penalties for noncompliance. Although we believe that we use FDA approved resins and pigments in our
products that directly contact food and drug products, and we believe our products are in material compliance with all
applicable requirements, we remain subject to the risk that our products could be found not to be in compliance with
such requirements.
The plastics industry, including us, is subject to existing and potential federal, state, local and foreign legislation
designed to reduce solid waste by requiring, among other things, plastics to be degradable in landfills, minimum levels
of recycled content, various recycling requirements, disposal fees, and limits on the use of plastic products. In
particular, certain states have enacted legislation requiring products packaged in plastic containers to comply with
standards intended to encourage recycling and increased use of recycled materials. In addition, various consumer and
special interest groups have lobbied from time to time for the implementation of these and other similar measures. We
believe that the legislation promulgated to date and such initiatives to date have not had a material adverse effect on us.
There can be no assurance that any such future legislative or regulatory efforts or future initiatives would not have a
material adverse effect on us.
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 the SEC. Our internet address is www.berryplastics.com. The information contained
on our website is not being incorporated herein.
Item 1A. RISK FACTORS
Our substantial indebtedness could affect our ability to meet our obligations and may otherwise restrict our activities.
We have a significant amount of indebtedness, which requires significant interest payments. Our inability to generate
sufficient cash flow to satisfy our debt obligations, or to refinance our obligations on commercially reasonable terms,
would have a material adverse effect on our business, financial condition and results of operations.
Our substantial indebtedness could have important consequences. For example, it could:
•
•
•
limit our ability to borrow money for our working capital, capital expenditures, debt service requirements or other
corporate purposes;
increase our vulnerability to general adverse economic and industry conditions; and
limit our ability to respond to business opportunities, including growing our business through acquisitions.
In addition, the credit agreements and indentures governing our current indebtedness contain, and any future debt
instruments would likely contain, financial and other restrictive covenants, which will impose significant operating and
financial restrictions on us, including restrictions on our ability to, among other things, incur or guarantee additional
debt; pay dividends and make other restricted payments; create or incur certain liens; make certain investments; engage
in sales of assets and subsidiary stock; enter into transactions with affiliates; transfer all or substantially all of our
assets or enter into merger or consolidation transactions; and make capital expenditures.
As a result of these covenants, we could be limited in the manner in which we conduct our business, and we may be
unable to engage in favorable business activities or finance future operations or capital needs. Furthermore, a failure to
comply with these covenants could result in an event of default, which, if not cured or waived, could have a material
adverse effect on our business, financial condition, and results of operations.
Increases in resin prices or a shortage of available resin could harm our financial condition and results of operations.
To produce our products, we use large quantities of plastic resins. Plastic resins are subject to price fluctuations,
including those arising from supply shortages and changes in the prices of natural gas, crude oil and other
petrochemical intermediates from which resins are produced. Over the past several years, we have at times experienced
rapidly increasing resin prices. Historically, we have been able to successfully manage the impact of higher raw material
costs by increasing our selling prices. However, raw material inflation could materially and adversely affect our revenue
and profitability in the short term as we attempt to pass through price increases to our customers and in the long term
as our customers could seek alternative solutions.
7
We may not be able to arrange for other sources of resin in the event of an industry-wide general shortage of resins
used by us, or a shortage or discontinuation of certain types of grades of resin purchased from one or more of our
suppliers. Any such shortage may materially negatively impact our competitive position versus companies that are able
to better or more cheaply source resin.
We may not be able to compete successfully and our customers may not continue to purchase our products.
We compete with multiple companies in each of our product lines on the basis of a number of considerations,
including price, service, quality, product characteristics and the ability to supply products to customers in a timely
manner. Our products also compete with metal, glass, paper and other packaging materials as well as plastic packaging
materials made through different manufacturing processes. Some of these competitive products are not subject to the
impact of changes in resin prices, which may have a significant and negative impact on our competitive position versus
substitute products. Our competitors may have financial and other resources that are substantially greater than ours
and may be better able than us to withstand higher costs. Competition could result in our products losing market share
or our having to reduce our prices, either of which could have a material adverse effect on our business, financial
condition and results of operations. In addition, since we do not have long-term arrangements with many of our
customers, these competitive factors could cause our customers to shift suppliers and/or packaging material quickly.
Our success depends, in part, on our ability to respond timely to customer and market changes.
We may pursue and execute acquisitions, which could adversely affect our business.
As part of our growth strategy, we consider acquisitions that either complement or expand our existing business and
create economic value. We cannot assure you that we will be able to consummate any such transactions or that any
future acquisitions will be consummated at acceptable prices and terms. Acquired businesses may not achieve the levels
of revenue, profit, productivity or otherwise perform as we expect. Acquisitions involve special risks, including the
potential assumption of unanticipated liabilities and contingencies as well as difficulties in integrating acquired
businesses creating substantial costs, delays or other problems that could adversely affect our business, financial
condition and results of operations. Furthermore, we may not realize all of the synergies we expect to achieve from our
current strategic initiatives due to a variety of risks. If we are unable to achieve the synergies that we expect to achieve
from our strategic initiatives, it could adversely affect our business, financial condition and results of operations.
Because a significant number of Avintiv employees are represented by labor unions or trade councils and work under
collective bargaining agreements, any employee slowdown or strikes or the failure to renew collective bargaining
agreements could disrupt our business following the Avintiv acquisition.
As of September 26, 2015, approximately 52% of Avintiv’s employees are represented by labor unions or trade councils
and worked under collective bargaining agreements. We may not be able to maintain constructive relationships with
these labor unions or trade councils. We may not be able to successfully negotiate new collective bargaining agreements
on satisfactory terms in the future. The loss of a substantial number of these employees or a prolonged labor dispute
could disrupt our business following the Avintiv acquisition. Any such disruption could reduce our revenues, increase
our costs and result in significant losses following the Avintiv acquisition.
Current and future environmental and other governmental requirements could adversely affect our financial condition and
our ability to conduct our business.
While we have not been required historically to make significant capital expenditures in order to comply with applicable
environmental laws and regulations, we cannot predict with any certainty our future capital expenditure requirements
because of continually changing compliance standards and environmental technology. Furthermore, violations or
contaminated sites that we do not know about (including contamination caused by prior owners and operators of such
sites or newly discovered information) could result in additional compliance or remediation costs or other liabilities,
which could be material. We may also assume significant environmental liabilities in connection with acquisitions. In
addition, federal, state, local, and foreign governments could enact laws or regulations concerning environmental
matters that increase the cost of producing, or otherwise adversely affect the demand for, plastic products. Legislation
that would prohibit, tax or restrict the sale or use of certain types of plastic and other containers, and would require
diversion of solid waste such as packaging materials from disposal in landfills, has been or may be introduced in the
U.S. Congress, state legislatures, and other legislative bodies. Although we believe that any such laws promulgated to
8
date have not had a material adverse effect on us, there can be no assurance that future legislation or regulation would
not have a material adverse effect on us. Furthermore, a decline in consumer preference for plastic products due to
environmental considerations could have a negative effect on our business.
Both the FDA and the CPSC can require the manufacturer of defective products to repurchase or recall these products
and may also impose fines or penalties on the manufacturer. Similar laws exist in some states, cities and other countries
in which we sell products. In addition, laws exist in certain states restricting the sale of packaging with certain levels of
heavy metals and imposing fines and penalties for noncompliance. Although we believe we use FDA-approved resins
and pigments in our products that directly contact food and drug products and we believe our products are in material
compliance with all applicable requirements, we remain subject to the risk that our products could be found not to be
in compliance with these and other requirements. A recall of any of our products or any fines and penalties imposed in
connection with noncompliance could have a materially adverse effect on us. See “Business — Environmental Matters
and Government Regulation.”
We may not be able to successfully manage the Avintiv integration and it may disrupt our current plans and operations.
Our business may be negatively affected if we are unable to effectively manage our expanded operations and there can
be no assurance that we will be able to successfully integrate the businesses of Avintiv. Implementation of our
integration plans will require significant time and focus from management and may divert attention from the
day-to-day operations of the combined business. The integration of Avintiv may be made more difficult by our and
Avintiv’s respective efforts to continue to integrate other recent acquisitions, including Avintiv’s recent acquisitions. The
difficulties and risks associated with the integration of Avintiv could create substantial costs, delays or other problems
that could adversely affect our business, financial condition and results of operations. As a result of these and other
difficulties and risks, we may not accomplish the integration of Avintiv smoothly, successfully or within our budgetary
expectations or anticipated timeframes. Accordingly, we may fail to realize some or all of the anticipated benefits of the
Avintiv transaction.
In the event of a catastrophic loss of one of our key manufacturing facilities, our business would be adversely affected.
While we manufacture our products in a large number of diversified facilities and maintain insurance covering our
facilities, including business interruption insurance, a catastrophic loss of the use of all or a portion of one of our key
manufacturing facilities due to accident, labor issues, weather conditions, natural disaster or otherwise, whether short
or long-term, could have a material adverse effect on us.
We depend on information technology systems and infrastructure to operate our business, system inadequacies or failures
could harm our business.
We rely on the efficient and uninterrupted operation of information technology systems and networks. These systems
and networks are potentially vulnerable to damage or interruption from a variety of sources, including energy or
telecommunications failures, breakdowns, natural disasters, terrorism, war, computer malware or other malicious
intrusions, and random attacks. To date, system interruptions have been infrequent and have not had a material impact
on the business. However, there can be no assurance that these efforts will prevent future interruptions that would have
a material adverse effect on our business.
Goodwill and other intangibles represent a significant amount of our net worth, and a future write-off could result in lower
reported net income and a reduction of our net worth.
We are required to evaluate goodwill reflected on our balance sheet when circumstances indicate a potential
impairment, or at least annually, under the impairment testing guidelines outlined in the standard. Future changes in
the market multiples, cost of capital, expected cash flows, or other factors may cause our goodwill to be impaired,
resulting in a non-cash charge against results of operations to write off goodwill for the amount of impairment. If a
future write-off is required, the charge could have a material adverse effect on our consolidated net income in the
period of any such write off.
Disruptions in the overall economy and the financial markets may adversely impact our business.
Our industry is affected by macroeconomic factors, including national, regional, and local economic conditions,
employment levels, and shifts in consumer spending patterns. Disruptions in the overall economy and volatility in the
financial markets could reduce consumer confidence in the economy, negatively affecting consumer spending, which
9
could be harmful to our financial position and results of operations. In such event, decreased cash flow generated from
our business may adversely affect our financial position and our ability to fund our operations. In addition, major
macroeconomic disruptions involving the financial markets could adversely affect our ability to access the credit
markets and availability of financing for our operations.
We are a holding company and rely on dividends and other payments, advances and transfers of funds from our subsidiaries
to meet our obligations and pay dividends.
Berry Plastics Group, Inc. has no direct operations and no significant assets other than ownership of 100% of the
stock of Berry Plastics Corporation. Because Berry Plastics Group, Inc. conducts its operations through its
subsidiaries, it depends on those entities for dividends and other payments to generate the funds necessary to meet its
financial obligations, and to pay any dividends with respect to our common stock. Legal and contractual restrictions in
the agreements governing current and future indebtedness of Berry Plastics Group, Inc.’s subsidiaries, as well as the
financial condition and operating requirements of Berry Plastics Group, Inc.’s subsidiaries, may limit Berry Plastics
Group, Inc.’s ability to obtain cash from its subsidiaries. The earnings from, or other available assets of, Berry Plastics
Group, Inc.’s subsidiaries may not be sufficient to pay dividends or make distributions or loans to enable Berry Plastics
Group, Inc. to pay dividends going forward.
Our international operations pose risks to our business that may not be present with our domestic operations.
We have expanded, and may continue to expand operations in foreign countries where we have an existing presence or
enter new foreign markets and expect to increase sales of products as disposable income increases in developing
markets. Foreign operations are subject to certain risks that are unique to doing business in foreign countries. These
risks include fluctuations in foreign currency exchange rates, inflation, economic or political instability, shipping delays
in both our products and receiving delays of raw materials, changes in applicable laws, including assessments of income
and non-income related taxes, reduced protection of intellectual property and regulatory policies and various trade
restrictions including potential changes to export taxes or countervailing and anti-dumping duties for exported
products from these countries. We expect that the Avintiv transaction will rebalance our business mix to a greater
percentage of international operations, which will increase our exposure to these risks. Any of these risks could have a
negative impact on our ability to deliver products to customers on a competitive and timely basis. This could reduce or
impair our net sales, profits, cash flows and financial position. We are also subject to the Foreign Corrupt Practices Act
and other anti-bribery laws that generally bar bribes or unreasonable gifts to foreign governments or officials. We have
implemented safeguards and policies to discourage these practices by our employees and agents. However, our existing
safeguards and policies to assure compliance and any future improvements may prove to be less than effective and our
employees or agents may engage in conduct for which we might be held responsible. If employees violate our policies,
we may be subject to regulatory sanctions. Violations of these laws or regulations could result in sanctions including
fines, debarment from export privileges and penalties and could adversely affect our business, financial condition and
results of operations.
We hold cash and cash equivalents at various foreign subsidiaries that may not be readily available to meet U.S. cash
requirements.
Our various foreign subsidiaries hold cash and cash equivalents and these balances held outside the United States may
not be readily available to meet our domestic cash requirements. As a result of the Avintiv transaction, we expect a
greater percentage of our cash flows to be generated by our international operations. If we are unable to meet our U.S.
cash requirements using cash flows from U.S. operations, cash and cash equivalents held in the U.S., or by settling
loans receivable with our foreign subsidiaries, it may be necessary for us to consider repatriation of earnings held
outside the U.S. This may require us to record additional income tax expense and remit additional taxes, which could
have a material effect on our business, financial condition and results of operations.
We may not be successful in protecting our intellectual property rights, including our unpatented proprietary know-how
and trade secrets, or in avoiding claims that we infringed on the intellectual property rights of others.
In addition to relying on patent and trademark rights, we rely on unpatented proprietary know-how and trade secrets,
and employ various methods, including confidentiality agreements with employees and consultants, customers and
suppliers to protect our know-how and trade secrets. However, these methods and our patents and trademarks may not
afford complete protection and there can be no assurance that others will not independently develop the know-how
and trade secrets or develop better production methods than us. Further, we may not be able to deter current and
10
former employees, contractors and other parties from breaching agreements and misappropriating proprietary
information and it is possible that third parties may copy or otherwise obtain and use our information and proprietary
technology without authorization or otherwise infringe on our intellectual property rights. Furthermore, no assurance
can be given that we will not be subject to claims asserting the infringement of the intellectual property rights of third
parties seeking damages, the payment of royalties or licensing fees and/or injunctions against the sale of our products.
Any such litigation could be protracted and costly and could have a material adverse effect on our business, financial
condition and results of operations.
New and stricter legislation and regulations may affect our business and consolidated financial condition and results of
operations.
Increased legislative and regulatory activity and burdens, and a more stringent manner in which they are applied
(particularly in the U.S.), could significantly impact our business and the economy as a whole. This includes, among
other things, the possible taxation under U.S. law of certain income from foreign operations, compliance costs and
enforcement under the Dodd-Frank Wall Street Reform and Consumer Protection Act, compliance costs and
enforcement under the Sarbanes-Oxley Act, and costs associated with complying with the Patient Protection and
Affordable Care Act and the regulations promulgated thereunder. Specifically, the Sarbanes-Oxley Act requires that we
maintain effective disclosure controls and procedures and internal control over financial reporting. Our independent
public accountants auditing our financial statements are required to attest to the effectiveness of our internal control
over financial reporting. In order to continue to maintain the effectiveness of our disclosure controls and procedures
and internal control over financial reporting significant resources and management oversight is required.
We may not be able to achieve cost savings as a result of our restructuring efforts and productivity and cost reduction
initiatives.
From time to time we enter into cost reduction plans designed to deliver cost savings and improve equipment
utilization. Our ability to achieve the anticipated cost savings and other benefits from these initiatives within the
expected time frame is subject to many estimates and assumptions. Additionally, there are many factors which affect
our ability to achieve savings as a result of productivity and cost reduction initiatives, such as difficult economic
conditions, increased costs in other areas, the effects of and costs related to newly acquired entities, mistaken
assumptions, and the other risk factors set forth herein. In addition, any actual savings may be balanced by incremental
costs that were not foreseen at the time of the restructuring or cost reduction initiatives. As a result, anticipated savings
may not be achieved on the timetable desired or at all. Additionally, while we execute these restructuring activities to
achieve these savings, it is possible that our attention may be diverted from our ongoing operations which may have a
negative impact on our ongoing operations.
If we fail to maintain effective internal control over financial reporting at a reasonable assurance level following the Avintiv
Transaction, we may not be able to accurately report our financial results, and may be required to restate previously
published financial information which could have a material adverse effect on our operations, investor confidence in our
business and the trading prices of our securities.
We are required to assess the effectiveness of our internal control over financial reporting annually, as required by
Section 404 of the Sarbanes-Oxley Act. Even though, as of September 26, 2015, we concluded that our internal control
over financial reporting was effective, we need to maintain our processes and systems and adapt them as our business
grows and changes. This continuous process of maintaining and adapting our internal controls and complying with
Section 404 is expensive, time-consuming and requires significant management attention. As we grow our business or
acquire other businesses, including Avintiv, our internal controls may become more complex and we may require
significantly more resources to ensure they remain effective. Avintiv is not currently subject to the requirement to
obtain an attestation report from its independent registered public accounting firm on its management evaluation of
the effectiveness of its internal control over financial reporting.
Avintiv identified an error in the accounting for non-controlling interest in the financial statements of its subsidiary,
AVINTIV Specialty Materials, for the unaudited interim periods ended June 28, 2014 and September 27, 2014 relating
to its acquisition of Providência, which resulted in the restatement of certain Avintiv Specialty Materials’ consolidated
financial statements for such periods. In addition, in the past Avintiv has identified and remediated material weaknesses
and other deficiencies in its internal control over financial reporting. As a result of the restatement, Avintiv concluded
that it had a material weakness in internal controls over financial reporting. Our remediation of a material weakness
could require us to incur significant expense.
11
Item 1B. UNRESOLVED STAFF COMMENTS
None.
Item 2.
PROPERTIES
We lease or own our principal offices and manufacturing facilities. We believe that our property and equipment is
well-maintained, in good operating condition and adequate for our present needs.
Principal manufacturing facilities — United States — 70 locations (42 Rigid Packaging, 14 Engineered Materials, 14
Flexible Packaging); Canada — 4 locations (1 Rigid Packaging, 2 Engineered Materials, 1 Flexible Packaging);
Mexico — 4 locations (2 Engineered Materials, 2 Flexible Packaging); India — 2 locations (1 Engineered Materials, 1
Flexible Packaging), The Netherlands, Belgium, Germany and Australia (Engineered Materials); Brazil, Malaysia,
China, and France (Flexible Packaging). The Evansville, Indiana facility serves as our world headquarters.
Leased facilities — Evansville, Indiana; Lawrence, Kansas; Phillipsburg, New Jersey; Bowling Green, Kentucky;
Jackson, Tennessee; Anaheim, California; Cranbury, New Jersey; Easthampton, Massachusetts; Hanover, Maryland;
Baltimore, Maryland; Westerlo, Belgium; Baroda, India; Atlanta, Georgia; Louisville, Kentucky; Peosta, Iowa; Quad
Cities, Iowa; Syracuse, New York; Phoenix, Arizona; Aurora, Illinois; Lathrop, California; Tacoma, Washington;
Bloomington, Indiana; Chippewa Falls, Wisconsin; Orillia, Canada; Mexico City, Mexico; Preston, Australia; Johor,
Malaysia; Pewaukee, Wisconsin; Smyrna, Tennessee; Des Moines, Iowa; Milwaukee, Wisconsin; Schaumburg, Illinois;
Washington, New Jersey; and Tlalnepantla, Mexico.
Avintiv manufacturing facilities — United States — 5 locations, Brazil — 2 locations, France — 3 locations,
China — 2 locations, United Kingdom — 2 locations (leased), Germany (leased), Canada, Mexico, Argentina,
Colombia, Italy, Netherlands, Spain and India. The Avintiv manufacturing facilities currently owned and located in the
United States are in the process of being pledged as collateral for our senior notes and credit facility borrowings.
Item 3.
LEGAL PROCEEDINGS
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, which is immaterial to the
Company. The Company intends to appeal the judgment and file certain post-trial motions. While we are unable to
predict the ultimate outcome of this matter, management expects any final judgment against BPC to be covered by
insurance maintained by the Company.
The Company is party to various other legal proceedings, in addition to the matter discussed above, involving routine
claims which are incidental to our business. Although our legal and financial liability with respect to such proceedings
cannot be estimated with certainty, we believe that any ultimate liability would not be material to the business, financial
condition, results of operations or cash flows.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
Our common stock is listed on the New York Stock Exchange under the symbol “BERY.” The following table sets
forth, for the periods indicated, the high and low sales prices per share of our common stock reported on the New York
Stock Exchange.
PART II
1st quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2nd quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3rd quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4th quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12
Fiscal 2015
Fiscal 2014
High
$31.88
36.52
37.08
35.75
Low
$22.62
30.88
31.94
28.43
High
$23.57
24.75
25.84
26.21
Low
$18.12
21.88
22.13
23.80
As of the date of this filing there were approximately 115 active record holders of the common stock, but we estimate
the number of beneficial stockholders to be much higher as a number of our shares are held by brokers or dealers for
their customers in street name.
During fiscal 2014 and 2015 we did not declare or pay any cash dividends on our common stock. Any future
determination as to the declaration and payment of dividends, if any, will depend on then existing conditions,
contractual requirements and other factors our board of directors may deem relevant. The terms of our senior secured
credit facilities and the indentures governing our notes may restrict our ability to pay cash dividends on our common
stock. Our debt instruments contain covenants that restrict our ability to pay dividends on our common stock, as well
as the ability of our subsidiaries to pay dividends to us.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
There were no shares of our common stock repurchased during fiscal 2015.
Item 6.
SELECTED FINANCIAL DATA
Statement of Operations Data:
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative . . . . . . . . . . . . .
Amortization of intangibles . . . . . . . . . . . . . . . . . .
Restructuring and impairment charges(a) . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . .
Debt extinguishment . . . . . . . . . . . . . . . . . . . . . . .
Other expense (income), net . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net
Income (loss) before income taxes . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .
Income tax expense (benefit)
Consolidated net income (loss) . . . . . . . . . . . . . . . .
Net income attributable to non-controlling interest . .
Net income (loss) attributable to the Company . . . . .
Comprehensive income (loss) . . . . . . . . . . . . . . . . .
Net income (loss) available to Common Stockholders:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance Sheet Data (at period end):
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt obligations, less current portion . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholders’ equity (deficit)
. . . . . . . . . . . . . . . . .
Cash Flow and other Financial Data:
Fiscal 2015 Fiscal 2014 Fiscal 2013 Fiscal 2012 Fiscal 2011
$4,881
4,012
357
91
13
408
94
1
191
122
36
86
—
86
10
$
$
$4,958
4,190
320
102
30
316
35
(7)
221
67
4
63
1
62
37
$
$
$4,647
3,835
307
105
14
386
64
(7)
244
85
28
57
—
57
86
$
$
$4,766
3,984
317
109
31
325
—
(7)
328
4
2
2
—
2
3
$
$
$ 0.72
0.70
$ 0.53
0.51
$ 0.50
0.48
$ 0.02
0.02
$ 228
1,294
5,028
3,648
5,081
(65)
$ 129
1,364
5,252
3,844
5,353
(114)
$ 142
1,266
5,111
3,851
5,307
(196)
87
$
1,216
5,060
4,385
5,512
(475)
$4,561
3,908
284
106
221
42
68
(7)
327
(346)
(47)
(299)
—
$ (299)
$ (324)
$ (3.55)
(3.55)
42
$
1,250
5,161
4,525
5,612
(467)
Net cash from operating activities . . . . . . . . . . . . . .
$ 637
$ 530
$ 464
$ 479
$ 327
Net cash from investing activities . . . . . . . . . . . . . .
Net cash from financing activities . . . . . . . . . . . . . .
(165)
(365)
(422)
(119)
(245)
(164)
(255)
(179)
(523)
90
13
(a)
Includes a goodwill impairment charge of $165 million in fiscal 2011
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
You should read the following discussion in conjunction with the consolidated financial statements of Berry Plastics Group,
Inc. and its subsidiaries and the accompanying notes thereto, which information is included elsewhere herein. This
discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to,
those described in the “Risk Factors” section. Our actual results may differ materially from those contained in any
forward-looking statements. Segment level discussion of the results is disclosed in a manner consistent with the
organization structure at the end of the presented period.
Overview
Berry Plastics Group, Inc. (“Berry,” “we,” 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 specialty closures, prescription vials, specialty films,
adhesives, corrosion protection materials, as well as drink cups, thin-wall containers, and bottles. We sell our products
predominantly into stable, consumer-oriented end-markets, such as healthcare, personal care, and food and beverage.
We believe that we have created one of the largest product libraries in our industry, allowing us to be a comprehensive
solution provider to our customers. Our customers consist of a diverse mix of leading global, national, mid-sized
regional and local specialty businesses. The size and scope of our customer network allows us to introduce new
products we develop or acquire to a vast audience that is familiar with our brand. In fiscal 2015, no single customer
represented more than approximately 2% of net sales and our top ten customers represented 16% of net sales. We
believe our manufacturing processes and our ability to leverage our scale to reduce expenses on items, such as raw
materials, position us as a low-cost manufacturer relative to our competitors.
Executive Summary
Business. During fiscal 2015, we operated in the following four segments: Rigid Open Top, Rigid Closed Top
(together our Rigid Packaging business), Engineered Materials, and Flexible Packaging. The Rigid Packaging business
sells primarily containers, foodservice items, closures, overcaps, bottles, prescription containers, and tubes. Our
Engineered Materials segment primarily sells pipeline corrosion protection solutions, tapes and adhesives, polyethylene
based film products, and can liners. The Flexible Packaging segment primarily sells high barrier, multilayer film
products, as well as finished flexible packages such as printed pouches.
Raw Material Trends. Our primary raw material is plastic resin. Polypropylene and polyethylene account for
approximately 90% of our plastic resin pounds purchased. Plastic resins are subject to price fluctuations, including
those arising from supply shortages and changes in the prices of natural gas, crude oil and other petrochemical
intermediates from which resins are produced. The average industry prices, as published in Chem Data, per pound were
as follows by fiscal year:
Polyethylene Butene Film
2013
2014
2015
Polypropylene
2014
2015
2013
1st quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$.86
$.82
$.69
$.92
$.89
$.76
2nd quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3rd quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4th quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.75
.76
.73
.85
.86
.87
.74
.77
.79
.73
.68
.66
.95
.91
.92
.96
.84
.89
Due to differences in the timing of passing through resin cost changes to our customers on escalator/de-escalator
programs, segments are negatively impacted in the short term when plastic resin costs increase and are positively
impacted in the short term when plastic resin costs decrease. This timing lag in passing through raw material cost
changes could affect our results as plastic resin costs fluctuate.
Outlook. The Company is impacted by general economic and industrial growth, plastic resin availability and
affordability, and general industrial production. Our business has both geographic and end market diversity, which
reduces the effect of any one of these factors on our overall performance. Our results are affected by our ability to pass
14
through raw material cost changes to our customers, improve manufacturing productivity and adapt to volume changes
of our customers. Consumer demand for packaged food products has been under pressure for over two years. This has
put pressure on industry margins and asset utilization rates, which the Company has been able to partially offset by
pricing actions, asset consolidations, introduction of new products and synergies from acquisitions. During the first
half of fiscal 2015 we received a favorable impact on cash from operating activities from the declining resin prices. As
resin prices stabilize, we do not expect to receive this benefit from falling resin prices in fiscal 2016. Additionally, our
fiscal 2016 Adjusted Free Cash Flow guidance of $475 million assumes flat overall volumes, with our new Health,
Hygiene and Specialties division expected to grow above the overall Company average. Components of adjusted free
cash flow include $817 million of cash flow from operations, less $285 million of additions to property, plant, and
equipment and $57 million of payments under our tax receivable agreement. For further information related to
Adjusted Free Cash Flow as a non-GAAP financial measure, see “Liquidity and Capital Resources.”
Recent Developments
Revolving Line of Credit
In May 2015, the Company amended the credit agreement relating to its existing $650 million secured revolving credit
facility to extend the maturity date of the revolving credit facility from June 2016 to May 2020 and to reduce interest
margins and certain commitment fees.
51∕8% Second Priority Senior Secured Notes
In June 2015, the Company issued $700 million of 51∕8% second priority senior secured notes due July 2023. Interest on
the 51∕8% second priority senior secured notes is due semi-annually on January 15 and July 15. Proceeds from the
issuance and existing liquidity were used to satisfy and discharge all of the outstanding 93∕4% second priority senior
secured notes. The Company recognized a $94 million loss on extinguishment of debt, including $83 million of early
tender and redemption costs and an $11 million write-off of deferred financing fees.
Interest Rate Swap
In September 2015, the Company entered into an interest rate swap transaction to protect $1 billion of outstanding
variable rate term loan debt from future interest rate volatility. The agreement swapped the greater of a three-month
variable LIBOR contract or 1.00% for a fixed annual rate of 1.7185%, with an effective date in December 2015 and
expiration in June 2019.
Recent Acquisitions
Our acquisition strategy is focused on improving our long-term financial performance, enhancing our market positions,
and expanding our existing and complementary product lines. We seek to obtain businesses for attractive post-synergy
multiples, creating value for our stockholders from synergy realization, leveraging the acquired products across our
customer base, creating new platforms for future growth, and assuming best practices from the businesses we acquire.
The Company has included the expected benefits of acquisition integrations and restructuring plans within our
unrealized synergies, which are in turn recognized in earnings after an acquisition has been fully integrated or the
restructuring plan is completed. While the expected benefits on earnings is estimated at the commencement of each
transaction, once the execution of the plan and integration occur, we are generally unable to accurately estimate or
track what the ultimate effects have been due to system integrations and movements of activities to multiple facilities.
As historical business combinations and restructuring plans have not allowed us to accurately separate realized
synergies compared to what was initially identified, we measure the synergy realization based on the overall segment
profitability post integration.
Fiscal 2014 Acquisitions
In fiscal 2014, the Company completed 3 acquisitions which included the Rexam Healthcare Containers and Closures
business (“C&C”) for a purchase price of $133 million, net of cash acquired, Graphic Flexible Packaging LLC’s
flexible plastics and films business for a purchase price of $61 million, net of cash acquired, and a controlling interest
(75%) in Qingdao P&B Co., Ltd. for a purchase price of $35 million, net of cash acquired. See note 2 to the
consolidated financial statements for further discussion on the respective acquisitions.
15
AVINTIV Inc.
In October 2015, the Company acquired 100% of the capital stock of Avintiv for a purchase price of approximately
$2.3 billion 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. With 23 locations in 14 countries, an employee base of over 4,500 people, and the broadest
range of process technologies in the industry, Avintiv’s strategically located manufacturing facilities position it as a
global supplier to many of the same leading consumer and industrial product manufacturers that Berry supplies and
utilize similar key raw materials as Berry’s existing business. 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. See note 17 to the consolidated financial statements for further discussion on the Avintiv
acquisition.
Discussion of Results of Operations for Fiscal 2015 Compared to Fiscal 2014
Consolidated Overview
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income percentage of net sales. . . . . . . . . . . . . . . . . .
Fiscal Year
2015
2014
$ Change % Change
$4,881
$ 408
$4,958
$ 316
$(77)
$ 92
(2%)
29%
8%
6%
The net sales decrease of $77 million from fiscal 2014 is primarily attributed to a 3% base volume decline primarily
related to soft customer demand, selling price decreases of 2% due to the pass through of lower raw material costs, and
a 1% negative impact from foreign currency changes partially offset by net sales from businesses acquired in the last
twelve months.
The operating income increase of $92 million from fiscal 2014 is primarily attributed to a $42 million improvement in
the relationship of net selling price to raw material and freight costs, $6 million of operating income from businesses
acquired in the last twelve months, a $17 million decrease in depreciation and amortization expense, a $19 million
improvement in operating performance in manufacturing, and a $56 million decrease in business integration expenses.
The $56 million decrease in business integration expenses primarily consisted of a decrease in restructuring and
impairment costs of $17 million and a $39 million decrease in costs attributed primarily to manufacturing inefficiencies
associated with the 2014 cost reduction plan and acquisition integration costs. These improvements were partially
offset by $26 million from base volume declines, a $15 million increase in selling, general and administrative expenses,
and a $7 million negative impact from foreign currency changes. Business integration expenses consist of restructuring
and impairment charges, manufacturing inefficiencies associated with cost reduction plans, major innovation start-up
and other business optimization costs. Acquisition operating income (loss) is generally analyzed in total until the
acquisition has been included in our results for a full year.
Rigid Open Top
Fiscal Year
2015
2014
$ Change % Change
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,055
$1,110
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income percentage of net sales. . . . . . . . . . . . . . . . . .
$
71
$
34
7%
3%
$(55)
$ 37
(5%)
109%
Net sales in the Rigid Open Top segment decreased by $55 million from fiscal 2014 primarily due to a 3% base volume
decline and selling price decreases of 2% due to the pass through of lower raw material costs. The base volume decline
is primarily related to a decline in dairy container product sales due to soft customer demand.
The operating income increase of $37 million from fiscal 2014 primarily is attributed to $14 million of improvement in
the relationship of net selling price to raw material and freight costs and a $37 million decrease in business integration
expenses. The $37 million decrease primarily consisted of a decrease in restructuring and impairment costs of $8
million and a $29 million decrease in costs attributed to manufacturing inefficiencies associated with the 2014 cost
reduction plan. These improvements were partially offset by $7 million in base volume declines, a $5 million increase in
selling, general and administrative expenses, and a decline in operating performance in manufacturing.
16
Rigid Closed Top
Fiscal Year
2015
2014
$ Change % Change
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,474
$1,469
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 139
$ 132
$5
$7
0%
5%
Operating income percentage of net sales . . . . . . . . . . . . . . . . .
9%
9%
Net sales in the Rigid Closed Top segment increased by $5 million from fiscal 2014 primarily as a result of acquisition
volume of 7% attributed to the United States portion of the Healthcare Containers and Closures business purchased
from Rexam (“C&C”), partially offset by a volume decline of 3% and selling price decreases due to the pass through of
lower raw material costs. The volume decline is primarily attributed to general market softness in our closure product
offerings.
The operating income increase of $7 million from fiscal 2014 is primarily attributed to a $8 million improvement in
operating performance in manufacturing, $3 million of improvement in the relationship of net selling price to raw
material and freight costs, a $7 million decrease in depreciation and amortization expense, and a $3 million decline in
selling, general, and administrative expenses, partially offset by $14 million in base volume declines.
Engineered Materials
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income percentage of net sales. . . . . . . . . . . . . . . . . .
Fiscal Year
2015
2014
$ Change % Change
$1,397
$ 143
$1,455
$ 125
$(58)
$ 18
(4%)
14%
10%
9%
Net sales in the Engineered Materials segment decreased by $58 million from fiscal 2014 primarily as a result of a 1%
base volume decline, selling price decreases of 1% due to the pass through of lower raw material costs, and a 2%
negative impact from foreign currency. The base volume decline is primarily attributed to general market softness and
lost import revenues in our home and party product offerings.
The operating income increase of $18 million from fiscal 2014 is primarily attributed to a decrease in restructuring and
impairment costs of $6 million, a $3 million improvement in operating performance in manufacturing, a $13 million
improvement in the relationship of net selling price to raw material and freight costs, and a $7 million decrease in
depreciation and amortization expense, partially offset by a $4 million increase in selling, general, and administrative
expenses, a $3 million negative impact from foreign currency changes, and $2 million in base volume declines.
Flexible Packaging
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income percentage of net sales . . . . . . . . . . . . . . . . . . . .
Fiscal Year
2014
2015
$955
$ 55
$924
$ 25
6%
3%
$ Change % Change
$31
$30
3%
120%
Net sales in Flexible Packaging increased $31 million from fiscal 2014 primarily as a result of acquisition volume of 9%
partially offset by a 3% base volume decline and a 3% negative impact from foreign currency changes.
The operating income increase of $30 million in the Flexible Packaging segment from fiscal 2014 is primarily attributed
to a $9 million improvement in operating performance in manufacturing, a $12 million improvement in the relationship
of net selling price to raw material and freight costs, an $8 million benefit from businesses acquired in the last 12
months, a $3 million decrease in depreciation and amortization expense, a decrease in restructuring and impairment
costs of $4 million, and a $10 million decrease of costs primarily from manufacturing inefficiencies associated with the
2014 cost reduction plan partially offset by $3 million from base volume declines, $9 million of increased selling general
and administrative expenses, and a $4 million negative impact from foreign currency changes.
17
Debt extinguishment
Fiscal Year
2014
2015
$ Change % Change
Debt extinguishment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$94
$35
$59
169%
Debt extinguishment increase of $59 million from fiscal 2014 primarily due to tender and redemption costs associated
with the discharge of the 9¾% second priority senior secured notes in fiscal 2015 compared to the various costs related
to the discharge of the 9½% second priority senior secured notes in fiscal 2014.
Other expense (income), net
Fiscal Year
2014
2015
$ Change % Change
Other expense (income), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1
$(7)
$8
114%
The other expense (income) increase of $8 million from fiscal 2014 is primarily the result of losses realized on the sale
and disposal of assets in fiscal 2015 compared to gains on the sale of assets in fiscal 2014.
Interest expense
Fiscal Year
2014
2015
$ Change % Change
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$191
$221
$(30)
(14%)
Interest expense decreased $30 million from fiscal 2014 primarily as the result of the retirement of the 93∕4% second
priority senior secured notes and corresponding issuance of the 51∕8% second priority senior secured notes in June 2015
as well as the retirement of the 91∕2% second priority senior secured notes and corresponding issuance of the 51∕2%
second priority senior secured notes in May 2014.
Income tax expense
Fiscal Year
2014
2015
$ Change % Change
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$36
$4
$32
800%
We recorded an income tax expense of $36 million in fiscal 2015. The effective tax rate for fiscal 2015 compared to
fiscal 2014 is impacted by discrete items, the inclusion of certain international entities for which a full valuation
allowance is recognized, and $20 million of federal and state research and development tax credits recognized in fiscal
2014.
Discussion of Results of Operations for Fiscal 2014 Compared to Fiscal 2013
Consolidated Overview
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income percentage of net sales. . . . . . . . . . . . . . . . . .
Fiscal Year
2014
2013
$ Change % Change
$4,958
$ 316
$4,647
$ 386
$311
$ (70)
7%
(18%)
6%
8%
Net sales increased from $4,647 million in fiscal 2013 to $4,958 million in fiscal 2014. This increase is primarily
attributed to net sales from businesses acquired in the last twelve months of 4% and selling price increases of 4% due to
higher resin prices partially offset by base volume declines.
Operating income decreased from $386 million in fiscal 2013 to $316 million in fiscal 2014. This decrease is primarily
attributed to $27 million of raw material and freight cost inflation in excess of net selling price increases, $19 million
from base volume declines described above, a $2 million increase in depreciation and amortization expense, and a $57
million increase in business integration expense. The $57 million increase in business integration expense primarily
consisted of an increase in restructuring and impairment costs of $16 million, an increase of $9 million related to
major innovation start-up costs and the remaining $32 million primarily being costs attributed to manufacturing
inefficiencies associated with the 2014 cost reduction plan and acquisition integration costs. Manufacturing
inefficiencies represent abnormal period costs including wasted materials, unplanned facility or equipment downtime,
and excess labor incurred at both rationalized and receiving facilities.
18
Rigid Open Top
Fiscal Year
2014
2013
$ Change % Change
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,110
$1,127
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
34
$ 123
$(17)
$(89)
(2%)
(72%)
Operating income percentage of net sales. . . . . . . . . . . . . . . . . .
3%
11%
Net sales in the Rigid Open Top segment decreased from $1,127 million in fiscal 2013 to $1,110 million in fiscal 2014
due to base volume declines of 5% and product realignment of 1% partially offset by net selling price increases of 4%.
The volume decline was primarily attributed to softness in thermoformed drink cups and container product offerings.
Operating income for the Rigid Open Top segment decreased from $123 million in fiscal 2013 to $34 million in fiscal
2014. This decrease is primarily attributed to $18 million from base volume declines, $10 million decline in operating
performance in manufacturing, $1 million increase in selling, general and administrative expenses, a $12 million decline
in the relationship of net selling price to raw material and freight costs, and a $48 million increase in business
integration expense primarily consisting of an increase in restructuring and impairment costs of $12 million, an
increase of $9 million related to major innovation start-up costs and the remaining $27 million primarily being costs
attributed to manufacturing inefficiencies associated with the 2014 cost reduction plan. These manufacturing
inefficiencies represent abnormal period costs including wasted materials, unplanned facility or equipment downtime,
and excess labor incurred at both rationalized and receiving facilities.
Rigid Closed Top
Fiscal Year
2014
2013
$ Change % Change
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income percentage of net sales . . . . . . . . . . . . . . . . .
$1,469
$ 132
$1,387
$ 130
$82
$ 2
9%
9%
6%
2%
Net sales in the Rigid Closed Top segment increased from $1,387 million in fiscal 2013 to $1,469 million in fiscal 2014
as a result of net selling price increases of 2% and C&C acquisition volume of 4%.
Operating income for the Rigid Closed Top segment increased from $130 million in fiscal 2013 to $132 million in fiscal
2014. The increase is attributed to a $6 million decline in the relationship of net selling price to raw material costs, $1
million attributed to negative product mix, $3 million increase in business integration expenses attributed to acquisition
integration, and $1 million loss from businesses acquired in the last twelve months offset by $1 million decrease in
depreciation and amortization, a $7 million improvement in operating performance in manufacturing and a $5 million
improvement in selling, general and administrative expenses.
Engineered Materials
Fiscal Year
2014
2013
$ Change % Change
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,455
$1,397
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income percentage of net sales . . . . . . . . . . . . . . . . .
$ 125
$ 116
9%
8%
$58
$ 9
4%
8%
The Engineered Materials segment net sales increased from $1,397 million in fiscal 2013 to $1,455 million in fiscal 2014
as a result of net selling price increases of 4% and base volume growth of 1% partially offset by exited business of 1%.
19
Operating income for the Engineered Materials segment increased from $116 million in fiscal 2013 to $125 million in
fiscal 2014. This increase is primarily attributed to a $19 million improvement in manufacturing operating
performance, $2 million decline in restructuring expense, a $5 million decline in acquisition integration expense, and a
$4 million decline in selling, general and administrative expenses partially offset by $14 million of raw material cost
inflation in excess of net selling prices, $2 million from exited business, and a $5 million increase in depreciation and
amortization expense.
Flexible Packaging
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal Year
2013
2014
$924
$ 25
$736
$ 17
$ Change % Change
$188
$
8
26%
47%
Operating income percentage of net sales . . . . . . . . . . . . . . . . . . . .
3%
2%
The Flexible Packaging segment net sales increased from $736 million in fiscal 2013 to $924 million in fiscal 2014 as a
result of businesses acquired in the last twelve months of 22%, product realignment of 1% and net selling price
increases of 5% partially offset by a 2% volume decline attributed to soft customer demand.
Operating income for the Flexible Packaging segment increased from $17 million in fiscal 2013 to $25 million in fiscal
2014. This increase is primarily attributed to $10 million benefit from businesses acquired in the last twelve months, $5
million gain in the relationship of net selling price to raw material costs, $4 million improvement in operating
performance in manufacturing and a $2 million decline in depreciation and amortization expense partially offset by an
increase in restructuring and impairment costs of $7 million, and a $6 million increase in in business integration
expenses attributed to acquisition integration.
Debt extinguishment
Fiscal Year
2013
2014
$ Change % Change
Debt extinguishment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$35
$64
$(29)
(45%)
Debt extinguishment decreased from $64 million in fiscal 2013 to $35 million in fiscal 2014. The decrease is primarily
attributed to the various debt extinguishment costs that resulted from our incremental term loan restructuring and use
of the proceeds from our initial public offering in fiscal 2013 compared to the debt extinguishment costs related to the
discharge of the outstanding 9½% second priority senior secured notes in fiscal 2014.
Other income
Fiscal Year
2013
2014
$ Change % Change
Other income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(7)
$(7)
$ —
—%
Other income remained flat at $7 million in fiscal 2013 and fiscal 2014 primarily due to the change in the fair value of
derivative instruments in fiscal 2013 offset by gains recognized on asset disposals in fiscal 2014.
Interest expense
Fiscal Year
2013
2014
$ Change % Change
Interest expense, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$221
$244
$(23)
(9%)
Interest expense decreased from $244 million in fiscal 2013 to $221 million in fiscal 2014 primarily as the result of the
various debt extinguishments and refinancings completed in the last twenty four months.
Income tax expense
Fiscal Year
2013
2014
$ Change % Change
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$4
$28
$(24)
(86%)
We recorded an income tax expense of $4 million in fiscal 2014 compared to $28 million in fiscal 2013. The effective tax
rate is impacted by the relative impact of discrete items and certain international entities for which a full valuation
allowance is recognized and $20 million of federal and state research and development tax credits recognized in fiscal 2014.
20
Liquidity and Capital Resources
Senior Secured Credit Facility
We manage our global cash requirements considering (i) available funds among the many subsidiaries through which
we conduct business, (ii) the geographic location of our liquidity needs, and (iii) the cost to access international cash
balances. We have senior secured credit facilities consisting of $2.4 billion of term loans and a $650 million asset based
revolving line of credit. The revolving credit facility matures in May 2020, $1.0 billion of the term loans mature in
January 2021, and the remaining $1.4 billion of term loans mature in February 2020. The availability under the
revolving line of credit is the lesser of $650 million or an amount determined by a defined borrowing base which is
calculated based on available accounts receivable and inventory. The revolving line of credit allows up to $130 million
of letters of credit to be issued instead of borrowings under the revolving line of credit. At the end of fiscal 2015, the
Company had no outstanding balance on the revolving credit facility, $37 million of outstanding letters of credit and a
$142 million borrowing base reserve, resulting in unused borrowing capacity of $471 million under the revolving line of
credit. The Company was in compliance with all covenants at the end of fiscal 2015.
Our fixed charge coverage ratio, as defined in the revolving credit facility, is calculated based on a numerator consisting
of adjusted EBITDA less pro forma adjustments, income taxes paid in cash and capital expenditures, and a
denominator consisting of scheduled principal payments in respect of indebtedness for borrowed money, interest
expense and certain distributions. We are obligated to sustain a minimum fixed charge coverage ratio of 1.0 to 1.0
under the revolving credit facility at any time when the aggregate unused capacity under the revolving credit facility is
less than 10% of the lesser of the revolving credit facility commitments and the borrowing base (and for 10 business
days following the date upon which availability exceeds such threshold) or during the continuation of an event of
default. Our fixed charge ratio was 2.9 to 1.0 at the end of fiscal 2015.
Despite not having financial maintenance covenants, our debt agreements contain certain negative covenants. The
failure to comply with these negative covenants could restrict our ability to incur additional indebtedness, effect
acquisitions, enter into certain significant business combinations, make distributions or redeem indebtedness. The term
loan facility contains a negative covenant first lien secured leverage ratio covenant of 4.0 to 1.0 on a pro forma basis
for a proposed transaction, such as an acquisition or incurrence of additional first lien debt. Our first lien secured
leverage ratio was 2.8 to 1.0 at the end of fiscal 2015. In addition to its regular principal payments, in October 2014, the
Company elected to make a voluntary one-time $100 million principal payment on the outstanding term loan, using
existing liquidity.
A key financial metric utilized in the calculation of the first lien leverage ratio is Adjusted EBITDA as defined in the
Company’s senior secured credit facilities. The following table reconciles (i) our Adjusted EBITDA to operating income
and (ii) our Adjusted Free Cash Flow to cash flow from operating activities, in each case, for fiscal 2015 and the
quarterly period ended September 26, 2015:
Quarterly Period
Ended
Fiscal 2015 September 26, 2015
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business optimization and other expense(a)
. . . . . . . . . . . . . . . . . . . . .
Restructuring and impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized cost savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flow from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net additions to property, plant and equipment . . . . . . . . . . . . . . . . . .
Payments of tax receivable agreement . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted free cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flow from investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flow from financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 820
(350)
(44)
(13)
(5)
$ 408
$ 637
(162)
(39)
$ 436
(165)
(365)
$205
(87)
(9)
(2)
—
$107
$245
(56)
—
$189
(59)
(17)
(a)
Includes business optimization, integration expenses and non-cash charges
Adjusted EBITDA and Adjusted Free Cash Flow, as presented in this document, are supplemental financial measures
that are not required by, or presented in accordance with, generally accepted accounting principles in the United States
21
(“GAAP”). Adjusted EBITDA and Adjusted Free Cash Flow are not GAAP financial measures and should not be
considered as an alternative to operating or net income or cash flows from operating activities, in each case determined
in accordance with GAAP. We define “Adjusted EBITDA” as operating income before depreciation, amortization, and
certain restructuring and business optimization charges and as adjusted for unrealized cost reductions and acquired
businesses, including unrealized synergies, which are more particularly defined in our credit documents and the
indentures governing our notes. Adjusted EBITDA is used by our lenders for debt covenant compliance purposes and
by our management as one of several measures to evaluate management performance. While the determination of
appropriate adjustments in the calculation of Adjusted EBITDA is subject to interpretation under the terms of our
credit facilities, management believes the adjustments described above are in accordance with the covenants in such
credit facilities. Adjusted EBITDA eliminates certain charges that we believe do not reflect operations and underlying
operational performance. Although we use Adjusted EBITDA as a financial measure to assess the performance of our
business, the use of Adjusted EBITDA has important limitations, including that (1) Adjusted EBITDA does not
represent funds available for dividends, reinvestment or other discretionary uses; (2) Adjusted EBITDA does not reflect
cash outlays for capital expenditures or contractual commitments; (3) Adjusted EBITDA does not reflect changes in,
or cash requirements for, working capital; (4) Adjusted EBITDA does not reflect the interest expense or the cash
requirements necessary to service interest or principal payments on indebtedness; (5) Adjusted EBITDA does not
reflect income tax expense or the cash necessary to pay income taxes; (6) Adjusted EBITDA excludes depreciation and
amortization and, although depreciation and amortization are non-cash charges, the assets being depreciated and
amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect cash requirements for
such replacements; and (7) Adjusted EBITDA does not reflect the impact of earnings or charges resulting from matters
we consider not to be indicative of our ongoing operations.
We define “Adjusted Free Cash Flow” as cash flow from operating activities less additions to property, plant and
equipment and payments of the tax receivable agreement. We use Adjusted Free Cash Flow as a measure of liquidity
because it assists us in assessing our company’s ability to fund its growth through its generation of cash. We believe
Adjusted Free Cash Flow is useful to an investor in evaluating our liquidity because Adjusted Free Cash Flow and
similar measures are widely used by investors, securities analysts and other interested parties in our industry to measure
a company’s liquidity without regard to revenue and expense recognition, which can vary depending upon accounting
methods. Although we use Adjusted Free Cash Flow as a liquidity measure to assess our ability to generate cash, the
use of Adjusted Free Cash Flow has important limitations, including that: (1) Adjusted Free Cash Flow does not
reflect the cash requirements necessary to service principal payments on our indebtedness; and (2) Adjusted Free Cash
Flow removes the impact of accrual basis accounting on asset accounts and non-debt liability accounts.
These non-GAAP financial measures may be calculated differently by other companies, including other companies in
our industry, limiting their usefulness as comparative measures. Because of these limitations, you should consider
Adjusted EBITDA and Adjusted Free Cash Flow alongside other performance measures and liquidity measures,
including operating income, various cash flow metrics, net income and our other GAAP results.
Contractual Obligations and Off Balance Sheet Transactions
Our contractual cash obligations at the end of fiscal 2015 are summarized in the following table which does not give
any effect to the tax receivable agreement, including the $57 million payment made in October 2015, or income taxes
payable as we cannot reasonably estimate the timing of future cash outflows associated with those commitments.
Long-term debt, excluding capital leases . . . . . . . . . . . . . .
Capital leases(a)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed interest rate payments . . . . . . . . . . . . . . . . . . . . . .
Variable interest rate payments(b) . . . . . . . . . . . . . . . . . . .
Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Funding of pension and other postretirement
obligations(c)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total contractual cash obligations . . . . . . . . . . . . . . . . . .
Payments due by period as of the end of fiscal 2015
Total
$3,588
142
462
464
334
3
$4,993
< 1 year
$ 14
28
63
86
50
1 – 3 years
$ 28
48
127
171
85
3
$244
—
$459
4 – 5 years > 5 years
$1,327
42
127
169
62
—
$1,727
$2,219
24
145
38
137
—
$2,563
(a)
Includes anticipated interest of $16 million over the life of the capital leases.
22
(b)
Based on applicable interest rates in effect end of fiscal 2015.
(c)
Pension and other postretirement contributions have been included in the above table for the next fiscal year. The amount is the estimated
contributions to our defined benefit plans. The assumptions used by the actuary in calculating the projection includes weighted average return
on pension assets of approximately 7.25% for fiscal 2015. The estimation may vary based on the actual return on our plan assets. See
footnotes to the Consolidated Financial Statements of this Form 10-K for more information on these obligations.
Note: Tables excludes $2.5 billion of financing related to the Avintiv acquisitions that occurred in fiscal 2016 and Redeemable non-controlling
interest of $12 million as of fiscal 2015.
Cash Flows from Operating Activities
Net cash provided by operating activities increased $107 million to $637 million in fiscal 2015. The change is primarily
attributed to improved operating performance and improved working capital. The working capital improvement was
primarily attributed to declining resin prices during fiscal 2015.
Net cash provided by operating activities increased $66 million to $530 million in fiscal 2014. The change is primarily
attributed to improved working capital.
Cash Flows from Investing Activities
Net cash used in investing activities decreased $257 million to $165 million in fiscal 2015 primarily as a result of
deceased acquisition activity and lower capital expenditures.
Net cash used in investing activities increased $175 million to $422 million in fiscal 2014 million primarily as a result of
an increase in acquisition activity in the prior twelve months, offset by lower capital expenditures.
Cash Flows from Financing Activities
Net cash used in financing activities increased $246 million to $365 million in fiscal 2015. The change is primarily
attributed to an increase in long-term debt repayments and increased debt financing costs related to the discharge of
the 9¾% second priority senior secured notes.
Net cash used in financing activities decreased $45 million to $119 million in fiscal 2014. The change is primarily
attributed to a decline in long-term repayments, net of proceeds from the initial public offering, partially offset by the
$32 million of tax receivable agreement payments.
Liquidity Outlook
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 total TRA balance at the end of fiscal 2015 was $232 million, prior to the $57 million payment
made in October of 2015.
At the end of fiscal 2015, our cash balance was $228 million, of which $65 million was located outside the U.S. The
Company has deemed cash located outside the US to be indefinitely reinvested and we intend to use this to finance our
foreign operations and for future international expansion. We believe our existing U.S. based cash and cash flow from
U.S. operations, together with available borrowings under our senior secured credit facilities, will be adequate to meet
our liquidity needs over the next twelve months. We do not expect our free cash flow to be sufficient to cover all
long-term debt obligations and intend to refinance these obligations prior to maturity. However, we cannot predict our
future results of operations and our ability to meet our obligations involves numerous risks and uncertainties,
including, but not limited to, those described in the “Risk Factors” section in this Form 10-K.
Critical Accounting Policies and Estimates
We disclose those accounting policies that we consider to be significant in determining the amounts to be utilized for
communicating our consolidated financial position, results of operations and cash flows in the first note to our
consolidated financial statements included elsewhere herein. Our discussion and analysis of our financial condition and
results of operations are based on our consolidated financial statements, which have been prepared in accordance with
23
accounting principles generally accepted in the United States. The preparation of financial statements in conformity
with these principles requires management to make estimates and assumptions that affect amounts reported in the
financial statements and accompanying notes. Our estimates and judgments are based on historical experience and on
various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these
estimates under different assumptions or conditions.
Revenue Recognition. Revenue from the sales of products is recognized at the time title and risks and rewards of
ownership pass to the customer (either when the products reach the free-on-board shipping point or destination
depending on the contractual terms), there is persuasive evidence of an arrangement, the sales price is fixed and
determinable and collection is reasonably assured.
Accrued Rebates. We offer various rebates to our customers in exchange for their purchases. These rebate programs
are individually negotiated with our customers and contain a variety of different terms and conditions. Certain rebates
are calculated as flat percentages of purchases, while others include tiered volume incentives. These rebates may be
payable monthly, quarterly, or annually. The calculation of the accrued rebate balance involves significant management
estimates, especially where the terms of the rebate involve tiered volume levels that require estimates of expected annual
sales. These provisions are based on estimates derived from current program requirements and historical experience. We
use all available information when calculating these reserves. Our accrual for customer rebates was $53 million and
$50 million as of the end of fiscal 2015 and 2014, respectively.
In accordance with the guidance from the FASB for the impairment or disposal of
Impairments of Long-Lived Assets.
long-lived assets we review long-lived assets for impairment whenever events or changes in circumstances indicate the
carrying amount of such assets may not be recoverable. Impairment losses are recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by
those assets are less than the assets’ carrying amounts. The impairment loss is measured by comparing the fair value of
the asset to its carrying amount. We recognized non-cash asset impairment of long-lived assets of $2 million, $7
million and $5 million in fiscal 2015, 2014 and 2013, respectively.
Goodwill and Other Indefinite Lived Intangible Assets. We evaluate goodwill using a qualitative assessment to
determine whether it is more likely than not that the fair value of any reporting unit is less that the carrying amount. If
we determine that the fair value of the reporting unit is more likely than not below its carrying amount, we evaluate the
goodwill of that reporting unit using a two-step impairment test. Otherwise, we conclude that no impairment is
indicated and we do not perform the two-step impairment test.
For purposes of conducting our annual goodwill assessment, we have six reporting units, Rigid Open Top, Rigid
Closed Top, Engineered Materials, Flexible Packaging, Tapes and International. We determined that each of the
components within our respective reporting units should be aggregated and tested at the respective level as one
reporting unit. We reached this conclusion because within each of our reporting units, we have similar products,
production processes, markets served or management oversight which allows us to share assets and resources across the
components. We regularly re-align our production equipment and manufacturing facilities in order to take advantage
of cost savings opportunities, obtain synergies and create manufacturing efficiencies. We utilize our research and
development centers, design center, tool shops, and graphics center which all provide benefits to each of the reporting
units and work on new products that can benefit multiple components. We also believe that the goodwill is recoverable
from the overall operations of the unit given the similarity in production processes, synergies from leveraging the
combined resources, common raw materials, common research and development, similar margins, management
oversight and similar distribution methodologies. There were no indicators of impairment in the fourth quarter that
required us to perform a test for the recoverability of goodwill.
In conducting a qualitative assessment, the Company analyzes a variety of events or factors that may influence the fair
value of the reporting unit, including; changes in the carrying amount of the reporting unit; relevant market data for
both the company and its peer companies; industry outlooks; macroeconomic conditions; liquidity; changes in key
personnel; and the Company’s competitive position. Significant judgment is used to evaluate the totality of these events
and factors to make the determination of whether it is more likely than not that the fair value of the reporting unit is
less than its carrying value.
We completed our qualitative screen as of the first date of the fourth fiscal quarter and determined that it was more
likely than not that the fair value of each of our reporting units was greater than the carrying value, thus it was not
necessary to perform Step 1 for any of our reporting units during fiscal 2015. We reached this conclusion based on the
24
increased valuations within the packaging industry and projected future operating results of our reporting units. The
identified increased valuations within the plastics packaging industry is supported by the Company’s increase in stock
price, market capitalization, and total enterprise value. Future declines in packaging market multiple, significant
declines in operating performance, or significant declines in sales could impact future impairment tests or may require
a more frequent assessment.
Goodwill as of September 26, 2015, by reporting unit is as follows:
Rigid Open Top . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rigid Closed Top . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Engineered Films . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tapes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Flexible Packaging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill as of
September 26, 2015
$ 681
823
52
17
61
18
$1,652
We also performed our annual impairment test for fiscal 2015 of our indefinite lived intangible assets, which relates to
the “Berry Plastics” trade name and totaled $207 million at September 26, 2015 and determined that no impairment
existed. The fair value is estimated based on the income approach. Our forecasts included revenue growth consistent
with our historical revenue growth assumptions and inflation. Similar to our goodwill, significant declines in our sales
or operating performance could impact future impairment tests or may require a more frequent assessment.
Deferred Taxes and Effective Tax Rates. We estimate the effective tax rates (“ETR”) and associated liabilities or assets
for each of our legal entities of ours in accordance with authoritative guidance. We use tax planning to minimize or
defer tax liabilities to future periods. In recording ETRs and related liabilities and assets, we rely upon estimates, which
are based upon our interpretation of United States and local tax laws as they apply to our legal entities and our overall
tax structure. Audits by local tax jurisdictions, including the United States Government, could yield different
interpretations from our own and cause the Company to owe more taxes than originally recorded. For interim periods,
we accrue our tax provision at the ETR that we expect for the full year. As the actual results from our various
businesses vary from our estimates earlier in the year, we adjust the succeeding interim periods’ ETRs to reflect our
best estimate for the year-to-date results and for the full year. As part of the ETR, if we determine that a deferred tax
asset arising from temporary differences is not likely to be utilized, we will establish a valuation allowance against that
asset to record it at its expected realizable value. In multiple foreign jurisdictions, the Company believes that it will not
generate sufficient future taxable income to realize the related tax benefits. The Company has provided a full valuation
allowance against its foreign net operating losses included within the deferred tax assets in multiple foreign
jurisdictions. The Company has not provided a valuation allowance on its federal net operating losses in the United
States because it has cumulative income, federal taxable income, and has also determined that future reversals of its
temporary taxable differences will occur in the same periods and are of the same nature as the temporary differences
giving rise to the deferred tax assets. Changes in our valuation allowance could also impact our tax receivable
agreement obligation. Our valuation allowance against deferred tax assets was $29 million and $56 million as of the
end of fiscal 2015 and 2014, respectively.
Based on a critical assessment of our accounting policies and the underlying judgments and uncertainties affecting the
application of those policies, we believe that our consolidated financial statements provide a meaningful and fair
perspective of the Company and its consolidated subsidiaries. This is not to suggest that other risk factors such as
changes in economic conditions, changes in material costs, our ability to pass through changes in material costs, and
others could not materially adversely impact our consolidated financial position, results of operations and cash flows
in future periods.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Sensitivity
We are exposed to market risk from changes in interest rates primarily through our senior secured credit facilities. At
September 26, 2015, our senior secured credit facilities are comprised of (i) $2.4 billion term loans and (ii) a $650
25
million revolving credit facility with no borrowings outstanding. Borrowings under our senior secured credit facilities
bear interest, at our option, at either an alternate base rate or an adjusted LIBOR rate for a one-, two-, three- or six
month interest period, or a nine- or twelve-month period, if available to all relevant lenders, in each case, plus an
applicable margin. The alternate base rate is the greater of (i) in the case of our term loans, Credit Suisse’s prime rate
or, in the case of our revolving credit facility, Bank of America’s prime rate and (ii) one-half of 1.0% over the weighted
average of rates on overnight Federal Funds as published by the Federal Reserve Bank of New York. At September 26,
2015, the LIBOR rate of 0.33% applicable to the term loans was below the LIBOR floor of 1.00. A 0.25% change in
LIBOR would not have a material impact on our interest expense.
In February 2013, the Company entered into an interest rate swap transaction to protect $1 billion of outstanding
variable rate term loan debt from future interest rate volatility. The agreement swapped the greater of a three-month
variable LIBOR contract or 1.00% for a fixed annual 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 loss and Deferred income taxes 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 protect $1 billion of outstanding
variable rate term loan debt from future interest rate volatility. The agreement swaps the greater of a three-month
variable LIBOR contract or 1.00% for a fixed annual 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.
In September 2015, the Company entered into an interest rate swap transaction to protect $1 billion of outstanding
variable rate term loan debt from future interest rate volatility. The agreement swapped the greater of a three-month
variable LIBOR contract or 1.00% for a fixed annual rate of 1.7185%, with an effective date in December 2015 and
expiration in June 2019. The Company records changes in fair value in Accumulated other comprehensive income.
Resin Cost Sensitivity
We are exposed to market risk from changes in plastic resin prices that could impact our results of operations and
financial condition. Our plastic resin purchasing strategy is to deal with only high-quality, dependable suppliers. We
believe that we have maintained strong relationships with these key suppliers and expect that such relationships will
continue into the foreseeable future. However, we can give you no assurances as to such availability or the prices
thereof. If the price of resin increased or decreased by 5% it would result in a material change to our financial
statements.
Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
Reports of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Income and Comprehensive Income for fiscal 2015, 2014 and 2013 . . . . . . . . . . . . .
Consolidated Balance Sheets as of fiscal 2015 and 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for fiscal 2015, 2014 and 2013 . . . . . . . . .
Consolidated Statements of Cash Flows for fiscal 2015, 2014 and 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29
31
32
33
34
35
All schedules have been omitted because they are not applicable or not required or because the required information is
included in the consolidated financial statements or notes thereto.
Index to Financial Statement Schedules
26
Item 9.
None.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Item 9A. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures
We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Exchange Act,
that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and
forms, and that such information is accumulated and communicated to our management, including our Chief
Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In
designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and
procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the
objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and
procedures, our management was required to apply its judgment in evaluating the cost-benefit relationship of possible
disclosure controls and procedures.
In connection with the preparation of our Form 10-K as of and for the fiscal year ended September 26, 2015, we
evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of September 26,
2015. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the
Company’s disclosure controls and procedures were effective as of September 26, 2015.
Management’s Report on Internal Controls over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projection of any evaluation of effectiveness to future periods is subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate. In making this assessment, management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013
Framework).
Based upon its assessment, management concluded that as of September 26, 2015, the Company’s internal controls
over financial reporting were effective. In addition, Ernst & Young LLP as of September 26, 2015, the Company’s
independent registered public accounting firm, provided an attestation report on the Company’s internal control over
financial reporting.
Changes in Internal Controls over Financial Reporting
No changes in our internal control over financial reporting occurred during the fourth quarter of fiscal 2015 that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
In October 2015, we acquired 100% of the capital stock of Avintiv which added 23 facilities, 18 of which are located
outside the U.S. Management considers this transaction to be material to the Company’s consolidated financial
statements and believes that the internal controls and procedures of Avintiv will have a material effect on the
Company’s internal control over financial reporting. As we work to integrate and combine Avintiv into the Company’s
existing internal control structure we are evaluating the Avintiv’s existing internal controls and procedures over
financial reporting.
Item 9B. OTHER INFORMATION
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item, with the exception of the Code of Ethics disclosure below, is incorporated
herein by reference to our definitive Proxy Statement to be filed in connection with the 2016 Annual Meeting of
Stockholders.
27
Code of Ethics
We have a Code of Business Ethics that applies to all directors and employees, including our Chief Executive Officer
and senior financial officers. These standards are designed to deter wrongdoing and to promote the highest ethical,
moral, and legal conduct of all employees. Our Code of Business Ethics can be obtained, free of charge, by contacting
our corporate headquarters or can be obtained from the Corporate Governance section of the Investors page on the
Company’s internet site.
Item 11.
EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by reference to our definitive Proxy Statement to be filed
in connection with the 2016 Annual Meeting of Stockholders.
Item 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information required by this Item, is incorporated herein by reference to our definitive Proxy Statement to be filed
in connection with the 2016 Annual Meeting of Stockholders.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
The information required by this Item is incorporated herein by reference to our definitive Proxy Statement to be filed
in connection with the 2016 Annual Meeting of Stockholders.
Item 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this Item is incorporated herein by reference to our definitive Proxy Statement to be filed
in connection with the 2016 Annual Meeting of Stockholders.
PART IV
Item 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
1. Financial Statements
The financial statements listed under Item 8 are filed as part of this report.
2. Financial Statement Schedules
Schedules have been omitted because they are either not applicable or the required information has been disclosed in
the financial statements or notes thereto.
3. Exhibits
The exhibits listed on the Exhibit Index immediately following the signature page of this annual report are filed as part
of this report.
28
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Berry Plastics Group, Inc.
We have audited the accompanying consolidated balance sheets of Berry Plastics Group, Inc. as of September 26,
2015, and September 27, 2014, and the related consolidated statements of income, comprehensive income,
stockholders’ equity (deficit) and cash flows for each of the three years in the period ended September 26, 2015. These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated
financial position of Berry Plastics Group, Inc. at September 26, 2015, and September 27, 2014, and the consolidated
results of its operations and its cash flows for each of the three years in the period ended September 26, 2015, in
conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), Berry Plastics Group, Inc.’s internal control over financial reporting as of September 26, 2015, based on
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission “(2013 framework)” and our report dated November 23, 2015, expressed an unqualified
opinion thereon.
/s/ Ernst & Young LLP
Indianapolis, Indiana
November 23, 2015
29
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Berry Plastics Group, Inc.
We have audited Berry Plastics Group, Inc.’s internal control over financial reporting as of September 26, 2015, based
on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission “(2013 framework)” (the COSO criteria). Berry Plastics Group, Inc.’s
management is responsible for maintaining effective internal control over financial reporting, and for its assessment of
the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on
Internal Controls over Financial Reporting. Our responsibility is to express an opinion on the company’s internal
control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. Our audit included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have
a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
In our opinion, Berry Plastics Group, Inc. maintained, in all material respects, effective internal control over financial
reporting as of September 26, 2015, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the 2015 consolidated financial statements of Berry Plastics Group, Inc. and our report dated November 23,
2015, expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Indianapolis, Indiana
November 23, 2015
30
Berry Plastics Group, Inc.
Consolidated Statements of Income
(in millions of dollars)
September 26,
2015
Fiscal years ended
September 27,
2014
September 28,
2013
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$4,881
$4,958
$4,647
Costs and expenses:
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . .
4,012
357
Amortization of intangibles . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and impairment charges . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt extinguishment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expense (income), net
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to non-controlling interests . . . . . . . . . . .
Net income attributable to the Company . . . . . . . . . . . . . . . . . .
$
Net income per share:
91
13
408
94
1
191
122
36
86
—
86
4,190
3,835
320
102
30
316
35
(7)
221
67
4
63
1
62
$
307
105
14
386
64
(7)
244
85
28
57
—
57
$
Basic (see footnote 14)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted (see footnote 14) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 0.72
$ 0.70
$ 0.53
$ 0.51
$ 0.50
$ 0.48
Berry Plastics Group, Inc.
Consolidated Statements of Comprehensive Income
(in millions of dollars)
September 26,
2015
Fiscal years ended
September 27,
2014
September 28,
2013
Consolidated net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Defined benefit pension and retiree health benefit plans . . . . . .
Provision for income taxes related to other comprehensive
income items
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income attributable to non-controlling interests . .
$ 86
(45)
(33)
(16)
18
10
—
Comprehensive income attributable to the Company . . . . . . . . . .
$ 10
$ 63
(16)
(3)
(11)
5
38
1
$ 37
$ 57
(5)
20
34
(20)
86
—
$ 86
See notes to consolidated financial statements.
31
Berry Plastics Group, Inc.
Consolidated Balance Sheets
(in millions of dollars)
September 26,
2015
September 27,
2014
Assets
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 228
$ 129
Accounts receivable, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill, intangible assets and deferred costs, net . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
434
522
162
37
1,383
1,294
2,349
2
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$5,028
Liabilities and stockholders’ equity (deficit)
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt, less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingencies
Redeemable non-controlling interest
Stockholders’ equity (deficit):
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock: (119.9 and 118.0 shares issued, respectively) . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital
Non-controlling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity (deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 330
338
37
705
3,648
387
341
5,081
12
1
406
3
(356)
(119)
(65)
491
604
166
42
1,432
1,364
2,455
1
$5,252
$ 395
314
58
767
3,844
386
356
5,353
13
1
367
3
(442)
(43)
(114)
Total liabilities and stockholders’ equity (deficit) . . . . . . . . . . . . . . . . . . . . . . . . . .
$5,028
$5,252
See notes to consolidated financial statements.
32
Berry Plastics Group, Inc.
Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
(in millions of dollars)
Common
Stock
Additional
Paid-in
Capital
Notes
Receivable-
Common
Stock
Non
Controlling
Interest
Accumulated
Other
Comprehensive
Loss
Balance at September 29, 2012 . . . . .
Stock compensation expense . . . . . . .
Repayment of note receivable . . . . . .
Proceeds from issuance of common
stock . . . . . . . . . . . . . . . . . . . . .
Termination of redeemable shares . . .
Proceeds from initial public offering . .
Obligation under tax receivable
agreement
. . . . . . . . . . . . . . . . .
Interest rate hedge, net of tax . . . . . .
Net income attributable to the
Company . . . . . . . . . . . . . . . . . .
Currency translation . . . . . . . . . . . .
Defined benefit pension and retiree
health benefit plans, net of tax . . . .
Derivative amortization, net of tax . .
Balance at September 28, 2013 . . . . .
Stock compensation expense . . . . . . .
Proceeds from issuance of common
stock . . . . . . . . . . . . . . . . . . . . .
Obligation under tax receivable
agreement
. . . . . . . . . . . . . . . . .
Interest rate hedge, net of tax . . . . . .
Net income attributable to the
Company . . . . . . . . . . . . . . . . . .
Currency translation . . . . . . . . . . . .
Defined benefit pension and retiree
health benefit plans, net of tax . . . .
Balance at September 27, 2014 . . . . .
Stock compensation expense . . . . . . .
Proceeds from issuance of
common stock . . . . . . . . . . . . . .
Interest rate hedge, net of tax . . . . . .
Net income attributable to the
Company . . . . . . . . . . . . . . . . . .
Currency translation . . . . . . . . . . . .
Defined benefit pension and retiree
health benefit plans, net of tax . . . .
Balance at September 26, 2015 . . . . .
$ 1
—
—
—
—
—
—
—
—
—
—
—
$ 131
16
—
27
23
438
(313)
—
—
—
—
—
$ 1
—
$ 322
15
—
—
—
—
—
—
$ 1
—
—
—
—
—
—
$ 1
17
13
—
—
—
—
$ 367
21
18
—
—
—
—
$ 406
$ (2)
—
2
—
—
—
—
—
—
—
—
—
$—
—
—
—
—
—
—
—
$—
—
—
—
—
—
—
$—
$ 3
—
—
—
—
—
—
—
—
—
—
—
$ 3
—
—
—
—
—
—
—
$ 3
—
—
—
—
—
—
$ 3
See notes to consolidated financial statements.
33
Accumulated
Deficit
$(561)
—
—
—
—
—
—
—
57
—
—
—
Total
$(475)
16
2
27
23
438
(313)
10
57
(5)
21
3
$ (47)
—
—
—
—
—
—
10
—
(5)
21
3
$ (18)
—
$(504)
—
$(196)
15
—
—
(2)
—
(16)
(7)
$ (43)
—
—
(21)
—
(45)
(10)
$(119)
—
—
—
62
—
—
$(442)
—
—
—
86
—
—
17
13
(2)
62
(16)
(7)
$(114)
21
18
(21)
86
(45)
(10)
$(356)
$ (65)
Berry Plastics Group, Inc.
Consolidated Statements of Cash Flows
(in millions of dollars)
September 26,
2015
Fiscal years ended
September 27,
2014
September 28,
2013
Cash Flows from Operating Activities:
Consolidated net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to non-controlling interests . . . . . . . . . . . . . . .
Net income attributable to the Company . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net cash from operating activities:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt extinguishment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlement of interest rate hedge . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of long-lived assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-cash items
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities:
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and other liabilities . . . . . . . . . . . . . . . . . . . . .
Net cash from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash Flows from Investing Activities:
. . . . . . . . . . . . . . . . . . . .
Additions to property, plant and equipment
Proceeds from sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions of business, net of cash acquired . . . . . . . . . . . . . . . . . . .
Net cash from investing activities
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash Flows from Financing Activities:
Proceeds from long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . . .
Payment of tax receivable agreement . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from initial public offering . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash from financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of currency translation on cash . . . . . . . . . . . . . . . . . . . . . . . .
Net change in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . .
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . .
$ 86
—
$ 86
259
91
6
94
—
21
26
2
—
46
74
(8)
(60)
637
(180)
18
(3)
(165)
693
(951)
18
(39)
—
—
(86)
(365)
(8)
99
129
$ 228
$
$
63
1
62
$
$
57
—
57
256
102
7
35
—
15
(4)
7
(3)
5
19
(1)
30
530
(215)
19
(226)
(422)
1,627
(1,687)
17
(32)
—
—
(44)
(119)
(2)
(13)
142
129
$
236
105
14
64
16
16
22
6
(6)
3
(43)
15
(41)
464
(239)
18
(24)
(245)
1,391
(1,978)
27
(5)
438
2
(39)
(164)
—
55
87
142
$
See notes to consolidated financial statements.
34
Berry Plastics Group, Inc.
Notes to Consolidated Financial Statements
(in millions of dollars, except as otherwise noted)
1. Basis of Presentation and Summary of Significant Accounting Policies
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 specialty closures, prescription vials, specialty films,
adhesives, corrosion protection materials, as well as drink cups, thin-wall containers, and bottles. We sell our products
predominantly into stable, consumer-oriented end-markets, such as healthcare, personal care, and food and beverage.
Basis of Presentation
Periods presented in these financial statements include fiscal periods ending September 26, 2015 (“fiscal 2015”),
September 27, 2014 (“fiscal 2014”), and September 28, 2013 (“fiscal 2013”). 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 with any one customer. The Company performs periodic credit evaluations of its customers’ financial
condition and generally does not require collateral. The Company’s fiscal year is based on fifty two week periods. The
Company has evaluated subsequent events through the date the financial statements were issued.
The consolidated financial statements include the accounts of Berry and its subsidiaries, all of which includes our
wholly owned and majority owned subsidiaries. Intercompany accounts and transactions have been eliminated in
consolidation. Where our ownership of consolidated subsidiaries is less than 100% the non-controlling interests are
reflected in Non-controlling interest and Redeemable non-controlling interests.
Revenue Recognition
Revenue from the sales of products is recognized at the time title and risks and rewards of ownership pass to the
customer, there is persuasive evidence of an arrangement, the sales price is fixed and determinable and collection is
reasonably assured. Provisions for certain rebates, sales incentives, trade promotions, coupons, product returns and
discounts to customers are accounted for as reductions in gross sales to arrive at net sales. In accordance with the
Revenue Recognition standards of the Accounting Standards Codification (“Codification” or “ASC”), the Company
provides for these items as reductions of revenue at the later of the date of the sale or the date the incentive is offered.
These provisions are based on estimates derived from current program requirements and historical experience.
Shipping, handling, purchasing, receiving, inspecting, warehousing, and other costs of distribution are presented in
Cost of goods sold in the Consolidated Statements of Income. The Company classifies amounts charged to its
customers for shipping and handling in Net sales in the Consolidated Statements of Income.
Purchases of Raw Materials and Concentration of Risk
The largest supplier of the Company’s total resin material requirements represented approximately 21% of purchases in
fiscal 2015. The Company uses a variety of suppliers to meet its resin requirements.
Research and Development
Research and development costs are expensed when incurred. The Company incurred research and development
expenditures of $33 million, $32 million, and $28 million in fiscal 2015, 2014, and 2013, respectively.
Stock-Based Compensation
The compensation guidance of the FASB requires that the compensation cost relating to share-based payment
transactions be recognized in financial statements based on alternative fair value models. The share-based
compensation cost is measured based on the fair value of the equity or liability instruments issued. The Company’s
share-based compensation plan is more fully described in Note 12. The Company recorded total stock compensation
expense of $21 million, $15 million, and $16 million for fiscal 2015, 2014 and 2013, respectively.
35
In August 2013, the Company recorded an $8 million stock compensation charge related to certain modifications to
prior Berry Plastics Incentive Plans, and amended outstanding non-qualified stock option agreements to reflect such
modifications.
The Company utilizes the Black-Scholes option valuation model for estimating the fair value of the stock options. The
model allows for the use of a range of assumptions. Expected volatilities utilized in the Black-Scholes model are based
on implied volatilities from traded stocks of peer companies. Similarly, the dividend yield is based on historical
experience and the estimate of future dividend yields. The risk-free interest rate is derived from the U.S. Treasury yield
curve in effect at the time of grant. The Company’s options have a ten year contractual life. For purposes of the
valuation model in fiscal years 2015, 2014, and 2013, the Company used the simplified method for determining the
granted options expected lives. The fair value for options granted has been estimated at the date of grant using a
Black-Scholes model, with the following weighted average assumptions:
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Volatility factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015
1.6%
0.0%
.30
Fiscal year
2014
1.3%
0.0%
.33
2013
0.6%
0.0%
.38
Expected option life . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7 years
7 years
7 years
Foreign Currency
For the non-U.S. subsidiaries that account in a functional currency other than U.S. Dollars, assets and liabilities are
translated into U.S. Dollars using period-end exchange rates. Sales and expenses are translated at the average exchange
rates in effect during the period. Foreign currency translation gains and losses are included as a component of
Accumulated other comprehensive income (loss) within stockholders’ equity (deficit). Gains and losses resulting from
foreign currency transactions are included in the Consolidated Statements of Income.
Cash and Cash Equivalents
All highly liquid investments purchased with a maturity of three months or less from the time of purchase are
considered to be cash equivalents.
Allowance for Doubtful Accounts
The Company’s accounts receivable and related allowance for doubtful accounts are analyzed in detail on a quarterly
basis and all significant customers with delinquent balances are reviewed to determine future collectability. The
determinations are based on legal issues (such as bankruptcy status), past history, current financial and credit agency
reports, and the experience of the credit representatives. Reserves are established in the quarter in which the Company
makes the determination that the account is deemed uncollectible. The Company maintains additional reserves based
on its historical bad debt experience. The following table summarizes the activity for fiscal years ended for the
allowance for doubtful accounts:
Allowance for doubtful accounts, beginning . . . . . . . . . . . . . . .
Bad debt expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-offs against allowance . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for doubtful accounts, ending . . . . . . . . . . . . . . . . .
2015
$ 3
2
(2)
$ 3
2014
$ 3
—
—
$ 3
2013
$ 3
1
(1)
$ 3
Inventories
Inventories are stated at the lower of cost or market and are valued using the first-in, first-out method. Management
periodically reviews inventory balances, using recent and future expected sales to identify slow-moving and/or obsolete
items. The cost of spare parts is charged to cost of goods sold when purchased. We evaluate our reserve for inventory
obsolescence on a quarterly basis and review inventory on-hand to determine future salability. We base our
determinations on the age of the inventory and the experience of our personnel. We reserve inventory that we deem to
36
be not salable in the quarter in which we make the determination. We believe, based on past history and our policies
and procedures, that our net inventory is salable. Our inventory reserves were $20 million and $19 million as of fiscal
2015 and fiscal 2014, respectively. Inventory as of fiscal 2015 and 2014 was:
Inventories:
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015
$309
213
$522
2014
$353
251
$604
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is computed primarily by the straight-line method over
the estimated useful lives of the assets ranging from 15 to 25 years for buildings and improvements, 2 to 10 years for
machinery, equipment, and tooling and over the term of the agreement for capital leases. Leasehold improvements are
depreciated over the shorter of the useful life of the improvement or the lease term. Repairs and maintenance costs are
charged to expense as incurred. The Company capitalized interest of $6 million, $6 million, and $5 million in fiscal
2015, 2014, and 2013, respectively. Property, plant and equipment as of fiscal 2015 and 2014 was:
Property, plant and equipment:
Land, buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment and construction in progress . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015
2014
$
367
2,618
2,985
(1,691)
$ 1,294
$
363
2,509
2,872
(1,508)
$ 1,364
Long-lived Assets
Long-lived assets, including property, plant and equipment and definite lived intangible assets are reviewed for
impairment in accordance with the Property, plant and equipment standard of the ASC whenever facts and
circumstances indicate that the carrying amount may not be recoverable. Specifically, this process involves comparing
an asset’s carrying value to the estimated undiscounted future cash flows the asset is expected to generate over its
remaining life. If this process were to result in the conclusion that the carrying value of a long-lived asset would not be
recoverable, a write-down of the asset to fair value would be recorded through a charge to operations. Fair value is
determined based upon discounted cash flows or appraisals as appropriate. Long-lived assets that are held for sale are
reported at the lower of the assets’ carrying amount or fair value less costs related to the assets’ disposition. We
recorded impairment charges totaling $2 million, $7 million, and $5 million to write-down long-lived assets to their net
realizable valuables during fiscal years 2015, 2014, and 2013 respectively.
Goodwill
The Company follows the principles provided by the Goodwill and Other Intangibles standard of the ASC. Goodwill is
not amortized but rather tested annually for impairment. The Company performs their annual impairment assessment
on the first day of the fourth quarter in each respective fiscal year. The Company has recognized cumulative charges
for goodwill impairment of $165 million which occurred in fiscal 2011. For purposes of conducting our annual
goodwill impairment test, the Company determined that we have six reporting units, Open Top, Rigid Closed Top,
Engineered Films, Flexible Packaging, International and Tapes. We determined that each of the components within
our respective reporting units should be aggregated. We reached this conclusion because within each of our reporting
units, we have similar products, management oversight, production processes and markets served which allow us to
share assets and resources across the product lines. We regularly re-align our production equipment and manufacturing
facilities in order to take advantage of cost savings opportunities, obtain synergies and create manufacturing
efficiencies. In addition, we utilize our research and development centers, design center, tool shops, and graphics center
which all provide benefits to each of the reporting units and work on new products that can benefit multiple product
37
lines. We also believe that the goodwill is recoverable from the overall operations of the unit given the similarity in
production processes, synergies from leveraging the combined resources, common raw materials, common research and
development, similar margins and similar distribution methodologies. In fiscal year 2015, the Company applied the
qualitative assessment and determined that it is more likely than not that the fair value of the reporting unit exceeded
the carrying amount of each of their reporting units. The Company reached this conclusion based on the increased
valuations within the packaging industry and projected future operating results and an increase in the Company’s
common stock price, market capitalization and total enterprise value. In fiscal 2014, the Company applied the
qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit may be
less than the carrying amount, and concluded that it was more likely than not that the fair value of each reporting unit
exceeded the carrying except for the Rigid Open Top reporting unit due to the decline in that units operating income.
The Company completed step 1 in Fiscal 2014 of the impairment test which indicated no impairment existed for Rigid
Open Top. In fiscal 2013, the Company applied the qualitative assessment to determine whether it is more likely than
not that the fair value of the reporting unit may be less than the carrying amount and determined that no impairment
was indicated and therefore did not perform a two-step impairment test.
The changes in the carrying amount of goodwill by reportable segment are as follows:
Rigid
Open Top
Rigid
Closed Top
Engineered
Materials
Flexible
Packaging
Balance as of fiscal 2013 . . . . . . . . . . . . . . .
. . . .
Foreign currency translation adjustment
Acquisitions (realignment), net . . . . . . . . . . .
Balance as of fiscal 2014 . . . . . . . . . . . . . . .
Foreign currency translation adjustment. . . . .
Acquisitions, net . . . . . . . . . . . . . . . . . . . . .
Balance as of fiscal 2015 . . . . . . . . . . . . . . . .
$681
—
—
$681
—
—
$681
$831
(2)
(2)
$827
(5)
1
$823
$73
(2)
—
$71
(2)
—
$69
$49
—
31
$80
(2)
1
$79
Total
$1,634
(4)
29
$1,659
(9)
2
$1,652
Deferred Financing Fees
Deferred financing fees are amortized to interest expense using the effective interest method over the lives of the
respective debt agreements. Pursuant to ASC 835-30 the Company presents $5 million of its debt issuance costs on the
balance sheet as a deduction from the carrying amount of the related debt liability instead of a deferred charge. In
addition, the remaining $4 million of deferred charges, which relate to the Company’s revolving line of credit, are
presented in Goodwill, intangible assets and deferred costs, net.
Intangible Assets
Customer relationships are being amortized using an accelerated amortization method which corresponds with the
customer attrition rates used in the initial valuation of the intangibles over the estimated life of the relationships which
range from 11 to 20 years. Trademarks that are expected to remain in use, which are indefinite lived intangible assets,
are required to be reviewed for impairment annually. Technology intangibles are being amortized using the straight-line
method over the estimated life of the technology which is 11 years. License intangibles are being amortized using the
straight-line method over the life of the license which is 10 years. Patent intangibles are being amortized using the
straight-line method over the shorter of the estimated life of the technology or the patent expiration date ranging from
10 to 20 years, with a weighted-average life of 15 years. The Company evaluates the remaining useful life of intangible
assets on a periodic basis to determine whether events and circumstances warrant a revision to the remaining useful
life. We completed the annual impairment test of our indefinite lived trade names and noted no impairment.
38
Customer
Relationships Trademarks
Other
Intangibles
Accumulated
Amortization Total
Balance as of fiscal 2013 . . . . . . . . . . . . . . . . . .
$1,134
$283
$107
$(668)
$ 856
Adjustment for income taxes . . . . . . . . . . . . . . .
Foreign currency translation adjustment . . . . . . .
Amortization expense . . . . . . . . . . . . . . . . . . . .
Acquisition intangibles . . . . . . . . . . . . . . . . . . .
(2)
(3)
—
38
—
(1)
—
—
(1)
(2)
—
5
—
4
(102)
—
(3)
(2)
(102)
43
Balance as of fiscal 2014 . . . . . . . . . . . . . . . . . .
$1,167
$282
$109
$(766)
$ 792
Adjustment for income taxes . . . . . . . . . . . . . . .
Foreign currency translation adjustment . . . . . . .
Amortization expense . . . . . . . . . . . . . . . . . . . .
Acquisition intangibles . . . . . . . . . . . . . . . . . . .
(3)
(6)
—
1
—
(1)
—
—
—
(3)
—
—
—
4
(91)
—
(3)
(6)
(91)
1
Balance as of fiscal 2015 . . . . . . . . . . . . . . . . . .
$1,159
$281
$106
$(853)
$ 693
Insurable Liabilities
The Company records liabilities for the self-insured portion of workers’ compensation, health, product, general and
auto liabilities. The determination of these liabilities and related expenses is dependent on claims experience. For most
of these liabilities, claims incurred but not yet reported are estimated based upon historical claims experience.
Income Taxes
The Company accounts for income taxes under the asset and liability approach, which requires the recognition of
deferred tax assets and liabilities for the expected future tax consequence of events that have been recognized in the
Company’s financial statements or income tax returns. Income taxes are recognized during the period in which the
underlying transactions are recorded. Deferred taxes, with the exception of non-deductible goodwill, are provided for
temporary differences between amounts of assets and liabilities as recorded for financial reporting purposes and such
amounts as measured by tax laws. If the Company determines that a deferred tax asset arising from temporary
differences is not likely to be utilized, the Company will establish a valuation allowance against that asset to record it at
its expected realizable value. The Company recognizes uncertain tax positions when it is more likely than not that the
tax position will be sustained upon examination by relevant taxing authorities, based on the technical merits of the
position. The amount recognized is measured as the largest amount of benefit that is greater than 50% likely of being
realized upon ultimate settlement. The Company’s effective tax rate is dependent on many factors including: the impact
of enacted tax laws in jurisdictions in which the Company operates; the amount of earnings by jurisdiction, due to
varying tax rates in each country; and the Company’s ability to utilize foreign tax credits related to foreign taxes paid
on foreign earnings that will be remitted to the United States.
Comprehensive Income (Loss)
Comprehensive income (loss) is comprised of 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.
39
The accumulated balances related to each component of other comprehensive income (loss) were as follows (amounts
below are net of taxes):
Currency
Translation
Defined Benefit
Pension and Retiree
Health Benefit Plans
Interest Rate
Hedges
Accumulated Other
Comprehensive Loss
Balance as of fiscal 2012 . . . . . . . . . . . . .
$(15)
Other comprehensive income (loss) . . . . . .
Provision for income taxes . . . . . . . . . . . .
Balance as of fiscal 2013 . . . . . . . . . . . . .
Other comprehensive loss . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . .
Balance as of fiscal 2014 . . . . . . . . . . . . .
Other comprehensive loss . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . .
Balance as of fiscal 2015 . . . . . . . . . . . . .
(5)
—
$(20)
(16)
—
$(36)
(45)
—
$(81)
$(29)
34
(13)
$ (8)
(11)
4
$(15)
(16)
6
$(25)
$ (3)
20
(7)
$ 10
(3)
1
$ 8
(33)
12
$(13)
$ (47)
49
(20)
$ (18)
(30)
5
$ (43)
(94)
18
$(119)
Accrued Rebates
The Company offers various rebates to customers based on purchases. These rebate programs are individually
negotiated with customers and contain a variety of different terms and conditions. Certain rebates are calculated as flat
percentages of purchases, while others included tiered volume incentives. These rebates may be payable monthly,
quarterly, or annually. The calculation of the accrued rebate balance involves significant management estimates,
especially where the terms of the rebate involve tiered volume levels that require estimates of expected annual sales.
These provisions are based on estimates derived from current program requirements and historical experience. The
accrual for customer rebates was $53 million and $50 million at the end of fiscal 2015 and 2014, respectively and is
included in Accrued expenses and other current liabilities.
Pension
Pension benefit costs include assumptions for the discount rate, retirement age, and expected return on plan assets.
Retiree medical plan costs include assumptions for the discount rate, retirement age, and health-care-cost trend rates.
Periodically, the Company evaluates the discount rate and the expected return on plan assets in its defined benefit
pension and retiree health benefit plans. In evaluating these assumptions, the Company considers many factors,
including an evaluation of the discount rates, expected return on plan assets and the health-care-cost trend rates of
other companies; historical assumptions compared with actual results; an analysis of current market conditions and
asset allocations; and the views of advisers.
Net Income Per Share
The Company calculates basic net income per share based on the weighted-average number of outstanding common
shares. The Company calculates diluted net income per share based on the weighted-average number of outstanding
common shares plus the effect of dilutive securities.
Use of Estimates
The preparation of the financial statements in conformity with U.S. generally accepted accounting principles requires
management to make extensive use of estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities and the reported amounts of sales and expenses. Actual
results could differ materially from these estimates. Changes in estimates are recorded in results of operations in the
period that the event or circumstances giving rise to such changes occur.
Recently Issued Accounting Pronouncements
Income Taxes
In July 2013, the FASB issued Accounting Standards Update No. 2013-11: Income Taxes (Topic 740), Presentation of
an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit
40
Carryforward Exists (a consensus of the FASB Emerging Issues Task Force) (“ASU 2013-11”). An entity is required to
present unrecognized tax benefits as a decrease in a net operating loss, similar tax loss or tax credit carryforward if
certain criteria are met. The determination of whether a deferred tax asset is available is based on the unrecognized tax
benefit and the deferred tax asset that exists at the reporting date and presumes disallowance of the tax position at the
reporting date. The guidance will eliminate the diversity in practice in the presentation of unrecognized tax benefits but
will not alter the way in which entities assess deferred tax assets for realizability. The adoption of ASU 2013-11 did not
have an impact on the Company’s consolidated financial statements.
Revenue Recognition
In May 2014, the Financial Accounting Standards Board (FASB) issued a final standard on revenue recognition.
Under the new standard, an entity should recognize revenue to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those
goods or services. In order to do so, an entity would follow the five-step process for in-scope transactions: 1) identify
the contract with a customer, 2) identify the separate performance obligations in the contract, 3) determine the
transaction price, 4) allocate the transaction price to the separate performance obligations in the contract, and
5) recognize revenue when (or as) the entity satisfies a performance obligation. For public entities, the provisions of the
new standard are effective for annual reporting periods beginning after December 15, 2017 and interim periods therein.
Early adoption for annual reporting periods beginning after December 15, 2016 is permitted. An entity can apply the
new revenue standard retrospectively to each prior reporting period presented or retrospectively with the cumulative
effect of initially applying the standard recognized at the date of initial application in retained earnings. There are areas
within the standard that are currently under review and reconsideration by the FASB, which could lead to future
updates to the standard. As the outcomes of this process could lead to changes to the standard, we are still in the
process of determining our approach to the adoption of this new standard, and the anticipated impact to the
consolidated financial statements.
Classification of Debt Issuance Costs
In April 2015, the FASB issued Accounting Standards Update No. 2015-03, Interest — Imputation of Interest
(Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. This standard amends existing guidance to
require the presentation of debt issuance costs in the balance sheet as a deduction from the carrying amount of the
related debt liability instead of a deferred charge. It is effective for annual reporting periods beginning after
December 15, 2015, but early adoption is permitted. The Company has elected to early adopt this guidance. The effects
of the adoption for fiscal years ended September 26, 2015 and September 27, 2014, were a $5 million and $16 million,
respectively, reduction of Goodwill, intangible assets, and deferred costs, net and Long-term debt, less current portion
on the consolidated balance sheets by amounts classified as deferred costs.
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.
We are evaluating the effect this guidance will have on our consolidated financial statements and related disclosures, but
do not expect the standard to have a material effect 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 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. We are
evaluating the effect this guidance will have on our consolidated financial statements and related disclosures, but do not
expect the standard to have a material effect on our financial statements.
41
2. Acquisition
Graphic Flexible Packaging LLC’s Flexible Plastics and Films
In September 2013, the Company acquired Graphic Flexible Packaging LLC’s flexible plastics and films business
(“Graphic Plastics”) for a purchase price of $61 million, net of cash acquired. Graphic Plastics is a producer of wraps,
films, pouches, and bags for the food, medical, industrial, personal care, and pet food markets. The Graphic Plastics
business is operated in the Company’s Flexible Packaging segment. To finance the purchase, the Company used
existing liquidity. The Graphic Plastics 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 estimated fair
values at the acquisition date. The acquired assets and assumed liabilities consisted of working capital of $8 million,
property and equipment of $18 million, intangible assets of $25 million, goodwill of $14 million and other long-term
liabilities of $4 million.
Qingdao P&B Co., Ltd
In January 2014, the Company acquired the controlling interest (75%) of Qingdao P&B Co., Ltd (“P&B”) for a
purchase price of $35 million, net of cash acquired. P&B utilizes thermoform, injection, and automated assembly
manufacturing processes to produce products for multiple markets across China as well as globally, most
predominately serving the food and personal care markets. P&B is operated in the Flexible Packaging segment. To
finance the purchase, the Company used existing liquidity. The P&B 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 estimated fair values at the acquisition date. As part of the P&B acquisition, the non-controlling
interest holder has a put option, and the Company has a call option on the remaining 25% interest in P&B that
becomes effective three years from the date of purchase. Upon execution of the put or call option, the purchase price
for the remaining equity interest will be determined based on the fair value at the date of execution. The
non-controlling interest of P&B is recorded in Redeemable non-controlling interest and will be carried at fair value
with adjustments in the fair value being recorded in Additional paid-in capital. The acquired assets and assumed
liabilities consisted of working capital of $9 million, property and equipment of $24 million, intangible assets of $11
million, goodwill of $10 million, other long-term liabilities of $4 million and Redeemable non-controlling interest of
$13 million.
Rexam Healthcare Containers and Closures
In June 2014, the Company acquired Rexam’s Healthcare Containers and Closures business (“C&C”) for a purchase
price of $133 million, net of cash acquired. The C&C business produces bottles, closures and specialty products for
pharmaceutical and over-the-counter applications. Facilities located in the United States are operated in the Rigid
Closed Top segment, and locations outside the United States are operated in the Flexible Packaging segment. To
finance the purchase, the Company used existing liquidity. The C&C acquisition has been accounted for under the
purchase method of accounting, and accordingly, the purchase price has been allocated to the identifiable assets and
liabilities based on estimated fair values at the acquisition date. The acquired assets and assumed liabilities consisted of
working capital of $32 million, property and equipment of $85 million, non-current deferred tax asset of $3 million,
intangible assets of $9 million, goodwill of $7 million, and other long-term liabilities of $3 million.
3. Long-Term Debt
Revolving Line of Credit
In May 2015, the Company amended the credit agreement relating to its existing $650 million secured revolving credit
facility to extend the maturity date of the revolving credit facility from June 2016 to May 2020 and to reduce interest
margins and certain commitment fees.
5⅛% Second Priority Senior Secured Notes
In June 2015, the Company issued $700 million of 5⅛% second priority senior secured notes due July 2023. Interest on
the 5⅛% second priority senior secured notes is due semi-annually on January 15 and July 15. Proceeds from the
issuance and existing liquidity were used to satisfy and discharge all of the outstanding 9¾% second priority senior
secured notes. The Company recognized a $94 million loss on extinguishment of debt, including $83 million of early
tender and redemption costs and an $11 million write-off of deferred financing fees.
42
Long-term debt consists of the following:
Maturity Date
September 26,
2015
September 27,
2014
Term loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . February 2020
Term loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 2021
$1,369
1,019
$1,383
1,122
Revolving line of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
May 2020
5⅛% Second Priority Senior Secured Notes . . . . . . . . . . . . . . . . .
July 2023
5½% Second Priority Senior Secured Notes . . . . . . . . . . . . . . . . .
May 2022
9¾% Second Priority Senior Secured Notes . . . . . . . . . . . . . . . . .
Retired
Debt discounts and deferred fees
. . . . . . . . . . . . . . . . . . . . . . . .
Capital leases and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Various
Total long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt
. . . . . . . . . . . . . . . . . . . . . . .
Long-term debt, less current portion . . . . . . . . . . . . . . . . . . . . . .
—
700
500
—
(29)
126
3,685
(37)
$3,648
—
—
500
800
(36)
133
3,902
(58)
$3,844
Berry Plastics Corporation Senior Secured Credit Facility
Our wholly owned subsidiary Berry Plastics Corporation’s senior secured credit facilities consist of $2.4 billion of term
loans and a $650 million asset-based revolving line of credit. The availability under the revolving line of credit is the
lesser of $650 million or based on a defined borrowing base which is calculated based on available accounts receivable
and inventory.
The borrowings under the senior secured credit facilities bear interest at a rate equal to an applicable margin plus, as
determined at the Company’s option, either (a) a base rate determined by reference to the higher of (1) the prime rate
of Credit Suisse, Cayman Islands Branch, as administrative agent, in the case of the term loan facility or Bank of
America, N.A., as administrative agent, in the case of the revolving credit facility and (2) the U.S. federal funds rate
plus 1∕2 of 1% or (b) LIBOR determined by reference to the costs of funds for eurodollar deposits in dollars in the
London interbank market for the interest period relevant to such borrowing Bank Compliance for certain additional
costs. The applicable margin for LIBOR rate borrowings under the revolving credit facility range from 1.25% to 1.75%,
term loan maturing in January 2021 is 2.75% annum with a LIBOR floor of 1.00% and the term loan maturing in
February 2020 is 2.50% per annum with a LIBOR floor of 1.00%.
In addition to paying interest on outstanding principal under the senior secured credit facilities, the Company is
required to pay a commitment fee to the lenders under the revolving credit facilities in respect of the unutilized
commitments thereunder at a rate equal to 0.25% to 0.325% per annum depending on the average daily available
unused borrowing capacity. The Company also pays a customary letter of credit fee, including a fronting fee of 0.125%
per annum of the stated amount of each outstanding letter of credit, and customary agency fees.
The term loan facility requires minimum quarterly principal payments of $4 million, with the remaining amount
payable upon maturity. The Company may voluntarily repay outstanding loans under the senior secured credit facilities
at any time without premium or penalty, other than customary “breakage” costs with respect to eurodollar loans. In
October 2014, the Company elected to make a voluntary one-time $100 million principal payment on the $1 billion
outstanding term loan, using existing liquidity. The senior secured credit facilities contain various restrictive covenants
that, among other things and subject to specified exceptions, prohibit the Company from prepaying other indebtedness,
and restrict its ability to incur indebtedness or liens, make investments or declare or pay any dividends. All obligations
under the senior secured credit facilities are unconditionally guaranteed by the Company and, subject to certain
exceptions, each of the Company’s existing and future direct and indirect domestic subsidiaries. The guarantees of
those obligations are secured by substantially all of the Company’s assets as well as those of each domestic subsidiary
guarantor.
Our fixed charge coverage ratio, as defined in the revolving credit facility, is calculated based on a numerator consisting
of adjusted EBITDA less pro forma adjustments, income taxes paid in cash and capital expenditures, and a
denominator consisting of scheduled principal payments in respect of indebtedness for borrowed money, interest
expense and certain distributions. We are obligated to sustain a minimum fixed charge coverage ratio of 1.0 to 1.0
43
under the revolving credit facility at any time when the aggregate unused capacity under the revolving credit facility is
less than 10% of the lesser of the revolving credit facility commitments and the borrowing base (and for 10 business
days following the date upon which availability exceeds such threshold) or during the continuation of an event of
default. At the end of fiscal 2015, the Company had unused borrowing capacity of $471 million under the revolving
credit facility and thus was not subject to the minimum fixed charge coverage ratio covenant. Our fixed charge ratio
was 2.9 to 1.0 at the end of fiscal 2015.
Despite not having financial maintenance covenants, our debt agreements contain certain negative covenants. The
failure to comply with these negative covenants could restrict our ability to incur additional indebtedness, effect
acquisitions, enter into certain significant business combinations, make distributions or redeem indebtedness. The term
loan facility contains a negative covenant first lien secured leverage ratio covenant of 4.0 to 1.0 on a pro forma basis
for a proposed transaction, such as an acquisition or incurrence of additional first lien debt. Our first lien secured
leverage ratio was 2.8 to 1.0 at the end of fiscal 2015.
Future maturities of long-term debt as of fiscal year end 2015 are as follows:
Fiscal Year
Maturities
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37
35
35
33
1,332
2,242
$3,714
Interest paid was $191 million, $214 million, and $245 million in fiscal 2015, 2014, and 2013, respectively.
4.
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, and did not identify any hedge ineffectiveness related to the interest rate swaps recorded on the
Consolidated Balance Sheets in the current 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 protect $1 billion of outstanding
variable rate term loan debt from future interest rate volatility. The agreement swapped the greater of a three-month
variable LIBOR contract or 1.00% for a fixed annual 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 loss and Deferred income taxes and will
be amortized to Interest expense from May 2016 through May 2019, the original term of the swap agreement.
44
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 annual 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.
In September 2015, the Company entered into an interest rate swap transaction to protect $1 billion of outstanding
variable rate term loan debt from future interest rate volatility. The agreement swapped the greater of a three-month
variable LIBOR contract or 1.00% for a fixed annual rate of 1.7185%, with an effective date in December 2015 and
expiration in June 2019. The Company records changes in fair value in Accumulated other comprehensive income.
Interest rate swaps . . . . . . . . . . . . . . . . . . . . . Other long-term liabilities
Balance Sheet Location
2015
$36
2014
$3
Liability Derivatives
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, 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 book value of our long-term indebtedness exceeded fair value by $55
million as of fiscal 2015, while conversely, its fair value exceeded book value by $86 million as of fiscal 2014. The
Company’s long-term debt fair values were determined using Level 2 inputs as other significant 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 under the circumstances and
events described in Note 1 and Note 10. 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 (see Note 1 and 10 for additional discussion). These
assets include primarily our definite lived and indefinite lived intangible assets, including Goodwill and our property
plant and equipment. The Company reviews Goodwill and other indefinite lived assets for impairment as of the first
day of the fourth fiscal quarter each year, and more frequently if impairment indicators exist. The Company
determined Goodwill and other indefinite lived assets were not impaired in our annual fiscal 2014 assessment and no
impairment indicators existed in the current quarter.
Included in the following tables are the major categories of assets measured at fair value on a non-recurring basis along
with the impairment loss recognized on the fair value measurement for the fiscal years then ended.
Indefinite-lived trademarks . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
Definite lived intangible assets . . . . . . . . . . .
Property, plant, and equipment . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Level 1
$ —
—
—
—
$ —
45
As of the end of fiscal 2015
Level 3
Total
Level 2
$ —
—
—
—
$ —
$ 207
1,652
486
1,294
$3,639
$ 207
1,652
486
1,294
$3,639
Impairment
$ —
—
—
2
$ 2
Level 1
As of the end of fiscal 2014
Level 3
Total
Level 2
Indefinite-lived trademarks . . . . . . . . . . . . .
$ —
$ —
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . .
Definite lived intangible assets . . . . . . . . . . .
Property, plant, and equipment . . . . . . . . . . .
—
—
—
—
—
—
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ —
$ —
$ 207
1,659
585
1,364
$3,815
$ 207
1,659
585
1,364
$3,815
Level 1
As of the end of fiscal 2013
Level 3
Total
Level 2
Indefinite-lived trademarks . . . . . . . . . . . . .
$ —
$ —
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . .
Definite lived intangible assets . . . . . . . . . . .
Property, plant, and equipment . . . . . . . . . . .
—
—
—
—
—
—
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ —
$ —
$ 207
1,634
649
1,266
$3,756
$ 207
1,634
649
1,266
$3,756
Impairment
$ —
—
—
7
$ 7
Impairment
$ —
—
5
—
$ 5
Valuation of Goodwill and Indefinite Lived Intangible Assets
ASC Topic 350 requires the Company to test goodwill for impairment at least annually. The Company conducts the
impairment test on the first day of the fourth fiscal quarter, unless indications of impairment exist during an interim
period. When assessing its goodwill for impairment, the Company utilizes a comparable company market approach in
combination with a discounted cash flow analysis to determine the fair value of their reporting units and corroborate
the fair values. The Company utilizes a relief from royalty method to value their indefinite lived trademarks and uses
the forecasts that are consistent with those used in the reporting unit analysis. The Company has six reporting units
more fully discussed in Note 1. In fiscal 2015, fiscal 2014 and fiscal 2013 the Company determined no impairment
existed. The Company did not recognize any impairment charges on the indefinite lived intangible assets in any of the
years presented.
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 or sold. 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 incurred an impairment charges of $2 million and $7
million related to property, plant and equipment in fiscal years 2015 and 2014, respectively. The Company did not incur
an impairment charge related to property, plant and equipment in fiscal 2013. The Company did not incur an
impairment charge on definite lived intangible assets in fiscal 2015 or 2014. The Company did recognize an impairment
charge of $5 million on definite lived intangible assets related to the decision to exit certain businesses during fiscal
2013.
46
5. Goodwill, Intangible Assets and Deferred Costs
The following table sets forth the gross carrying amount and accumulated amortization of the Company’s goodwill,
intangible assets and deferred costs as of the fiscal year end:
2015
2014
Amortization Period
Deferred financing fees – revolving line of credit
. . . . . . . . . . .
$
Accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred financing fees, net . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trademarks (indefinite lived) . . . . . . . . . . . . . . . . . . . . . . . . .
Trademarks (definite lived)
. . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
—
4
1,652
1,159
207
74
106
(853)
693
$
8
(4)
4
1,659
1,167
207
75
109
(766)
792
Total goodwill, intangible assets and deferred costs . . . . . . . . . .
$2,349
$2,455
Effective Interest
Method
Indefinite lived
11 – 20 years
Indefinite lived
8 – 15 years
10 – 20 years
Future amortization expense for definite lived intangibles as of fiscal 2015 for the next five fiscal years is $84 million,
$72 million, $55 million, $50 million and $46 million each year for fiscal years ending 2016, 2017, 2018, 2019, and 2020,
respectively.
6. Lease and Other Commitments and Contingencies
The Company leases certain property, plant and equipment under long-term lease agreements. Property, plant, and
equipment under capital leases are reflected on the Company’s balance sheet as owned. The Company entered into new
capital lease obligations totaling $29 million, $45 million, and $49 million during fiscal 2015, 2014, and 2013,
respectively, with various lease expiration dates through 2025. The Company records amortization of capital leases in
Cost of goods sold in the Consolidated Statement of Income. Assets under operating leases are not recorded on the
Company’s balance sheet. Operating leases expire at various dates in the future with certain leases containing renewal
options. The Company had minimum lease payments or contingent rentals of $24 million and $24 million and asset
retirement obligations of $8 million and $7 million as of fiscal 2015 and 2014, respectively. Total rental expense from
operating leases was $53 million, $54 million, and $53 million in fiscal 2015, 2014, and 2013, respectively.
Future minimum lease payments for capital leases and non-cancellable operating leases with initial terms in excess of
one year as of fiscal year end 2015 are as follows:
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: amount representing interest . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Present value of net minimum lease payments . . . . . . . . . . . . . . . . . . . .
Operating
Leases
$ 50
46
39
34
28
137
$334
Capital
Leases
$ 28
25
23
21
21
24
142
(16)
$126
The Company has entered into a series of sale-leaseback transactions, pursuant to which it sold certain facilities and is
leasing these facilities back. The Company has a total deferred gain on these sale-leaseback transactions of $28 million
and is amortizing this over the respective lease of the facility.
47
Litigation
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 which is immaterial to the
Company. The Company intends to appeal the judgment and file certain post-trial motions. While we are unable to
predict the ultimate outcome of this matter, management expects any final judgment against BPC to be covered by
insurance maintained by the Company.
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, the Company believes that any ultimate liability would not be material to its financial
position, results of operations or cash flows. The Company has various purchase commitments for raw materials,
supplies and property and equipment incidental to the ordinary conduct of business.
Collective Bargaining Agreements
At the end of fiscal 2015, we employed approximately 16,000 employees, and approximately 12% of those employees
are covered by collective bargaining agreements. There are four agreements, representing approximately 56% of union
employees, due for renegotiation in fiscal 2016. The remaining agreements expire after fiscal 2016. Our relations with
employees under collective bargaining agreements remain satisfactory and there have been no significant work
stoppages or other labor disputes during the past three years.
7. 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 as of fiscal year end.
Employee compensation, payroll, and other taxes . . . . . . . . . . . . . . . . .
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rebates
Property taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax receivable agreement obligation . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015
$102
38
53
13
10
57
65
$338
The following table sets forth the totals included in Other long-term liabilities as of fiscal year end.
Lease retirement obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sale-lease back deferred gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax receivable agreement obligation . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015
$ 32
28
57
175
36
13
$341
2014
$ 91
44
50
13
13
39
64
$314
2014
$ 31
30
45
234
3
13
$356
48
8.
Income Taxes
The Company is being taxed at the U.S. corporate level as a C-Corporation and has provided U.S. Federal, State and
foreign income taxes.
Significant components of income tax expense for the fiscal years ended are as follows:
2015
2014
2013
Current
United States
Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$—
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred:
United States
Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . .
Expense for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
7
10
31
(4)
(1)
26
$36
—
5
3
8
3
(5)
(2)
(4)
$ 4
$—
2
4
6
26
(3)
(1)
22
$28
U.S. income from continuing operations before income taxes was $99 million, $58 million, and $77 million for fiscal
2015, 2014, and 2013, respectively. Non-U.S. income from continuing operations before income taxes was $23 million,
$9 million, and $8 million for fiscal 2015, 2014, and 2013, respectively.
The reconciliation between U.S. Federal income taxes at the statutory rate and the Company’s benefit for income taxes
on continuing operations for fiscal year end is follows:
U.S. Federal income tax expense at the statutory rate . . . . . . . . . . . . . . .
Adjustments to reconcile to the income tax provision:
U.S. State income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in state valuation allowance . . . . . . . . . . . . . . . . . . . . . . . .
Research and development credits . . . . . . . . . . . . . . . . . . . . . . . . . .
Permanent differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in foreign valuation allowance . . . . . . . . . . . . . . . . . . . . . . .
Rate differences between U.S. and foreign . . . . . . . . . . . . . . . . . . . . .
APB 23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015
$43
2014
$ 23
2013
$29
7
(7)
(5)
—
—
(2)
—
—
5
—
(20)
(2)
1
(1)
(1)
(1)
(1)
—
—
—
1
(2)
—
1
Expense for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$36
$ 4
$28
49
Deferred income taxes result from temporary differences between the amount of assets and liabilities recognized for
financial reporting and tax purposes. The components of the net deferred income tax liability as of fiscal year end are
as follows:
2015
2014
Deferred tax assets:
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Deferred gain on sale-leaseback . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities and reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net operating loss carryforward . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Alternative minimum tax (AMT) credit carryforward . . . . . . . . . . . . .
Research and development credit carryforward . . . . . . . . . . . . . . . . .
Federal and state tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets, net of valuation allowance . . . . . . . . . . . . . .
Deferred tax liabilities:
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt extinguishment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax liabilities
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
12
84
9
130
9
22
7
3
279
(29)
250
137
256
79
3
475
$
3
13
58
10
248
9
22
13
9
385
(56)
329
157
279
107
6
549
Net deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(225)
$(220)
In the United States the Company had $361 million of federal net operating loss carryforwards as of fiscal 2015, which
will be available to offset future taxable income. As of fiscal year end 2015, the Company had state and foreign net
operating loss carryforwards of $684 million and $52 million, respectively, which will be available to offset future
taxable income. If not used, the federal net operating loss carryforwards will expire in future years beginning 2025
through 2031. AMT credit carryforwards totaling $9 million are available to the Company indefinitely to reduce future
years’ federal income taxes. The state net operating loss carryforwards will expire in future years beginning in 2015
through 2033. The Company has $22 million and $7 million of federal and state Research and Development tax
credits, respectively, that will expire in future years beginning 2027 through 2034. In addition, the Company has $4
million of other state tax credits that will expire in future years beginning in 2016 through 2020.
In connection with the initial public offering, the Company entered into an income tax receivable agreement 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. Based on the
Company’s assumptions using various items, including valuation analysis and current tax law, the Company recorded
an obligation of $313 million which was recognized as a reduction of Paid-in capital on the Consolidated Balance
Sheets. The Company made payments of $39 million, $32 million, and $5 million in fiscal years 2015, 2014, and 2013,
respectively. The balance at the end of fiscal 2015 was $232 million, and the Company made its fiscal year 2016
payment of $57 million in October 2015.
The Company believes that it will not generate sufficient future taxable income to realize the tax benefits in certain
foreign jurisdictions related to the deferred tax assets. The Company also has certain state net operating losses that may
expire before they are fully utilized. Therefore, the Company has provided a full valuation allowance against certain of
its foreign deferred tax assets and a valuation allowance against certain of its state deferred tax assets included within
the deferred tax assets.
50
Prior changes in ownership have created limitations under Sec. 382 of the Internal Revenue Code on annual usage of
net operating loss carryforwards. However, all of the Company’s Federal net operating loss carryforwards should be
available for use within the next five years. As part of the effective tax rate calculation, if we determine that a deferred
tax asset arising from temporary differences is not likely to be utilized, we will establish a valuation allowance against
that asset to record it at its expected realizable value. The Company has not provided a valuation allowance on its
federal net operating loss carryforwards in the United States because it has cumulative income, federal taxable income
and has also determined that future reversals of its temporary taxable differences will occur in the same periods and are
of the same nature as the temporary differences giving rise to the deferred tax assets. Our valuation allowance against
deferred tax assets was $29 million and $56 million as of fiscal year end 2015 and 2014, respectively, related to the
foreign and U.S. state operations. The Company paid cash taxes of $9 million, $7 million, and $3 million in fiscal 2015,
2014, and 2013, respectively.
Uncertain Tax Positions
We adopted the provisions of the Income Taxes standard of the Codification. This interpretation clarifies the
accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with
guidance provide by FASB and prescribes a recognition threshold of more-likely-than-not to be sustained upon
examination. Our policy to include interest and penalties related to gross unrecognized tax benefits within our
provision for income taxes did not change.
The following table summarizes the activity related to our gross unrecognized tax benefits for fiscal year end:
Beginning unrecognized tax benefits
. . . . . . . . . . . . . . . . . . . . . . . . . .
Gross increases – tax positions in prior periods . . . . . . . . . . . . . . . . .
Gross increases – current period tax positions . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lapse of statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending unrecognized tax benefits
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015
$14
—
1
(1)
(1)
$13
2014
$14
2
1
(2)
(1)
$14
The amount of unrecognized tax benefits that, if recognized, would affect our effective tax rate was $7 million and $8
million for fiscal year end 2015 and 2014.
As of fiscal year end 2015, we had $2 million accrued for payment of interest and penalties related to our uncertain tax
positions. Our penalties and interest related to uncertain tax positions are included in income tax expense.
We and our subsidiaries are routinely examined by various taxing authorities. Although we file U.S. federal, U.S. state,
and foreign tax returns, our major tax jurisdiction is the U.S. The IRS has completed an examination of our 2003, 2010
and 2011 tax years. Our 2004 – 2009, 2012 and 2013 tax years remain subject to examination by the IRS. There are
various other on-going audits in various other jurisdictions that are not material to our financial statements.
As of the end of fiscal 2015, we had unremitted earnings from foreign subsidiaries that are permanently reinvested for
continued use in foreign operations, accordingly, no provision for U.S. federal or state income taxes has been provided
thereon. If distributed, those earnings would result in additional income tax expense at approximately the U.S.
statutory rate. Determination of the amount of unrecognized deferred US income tax liability is not practicable due to
the complexities associated with its hypothetical calculation.
9. Retirement Plan
The Company maintains four defined benefit pension plans which cover certain manufacturing facilities. The
Company also maintains a retiree health plan, which covers certain healthcare and life insurance benefits for certain
retired employees and their spouses. Each of the four defined benefit plans and the retiree health plan are frozen plans.
The Company uses fiscal year end as a measurement date for the retirement plans.
The Company sponsors two defined contribution 401(k) retirement plans covering substantially all employees.
Contributions are based upon a fixed dollar amount for employees who participate and percentages of employee
contributions at specified thresholds. Contribution expense for these plans was $7 million, $8 million, and $7 million
for fiscal 2015, 2014, and 2013, respectively.
51
The projected benefit obligations of the Company’s plans presented herein are equal to the accumulated benefit
obligations of such plans. The tables below exclude the obligations related to the foreign plans, which carry immaterial
balances. The net amount of liability recognized is included in Other long-term liabilities on the Consolidated Balance
Sheets.
Defined Benefit
Pension Plans
2015
Change in Projected Benefit Obligations (PBO)
PBO at beginning of period . . . . . . . . . . . . . . . . . . .
$192
Service cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial loss (gain)
. . . . . . . . . . . . . . . . . . . . . . . .
Benefit settlements . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
8
11
(9)
(10)
2014
$178
—
8
15
—
(9)
PBO at end of period . . . . . . . . . . . . . . . . . . . . . . .
$193
$192
Change in Fair Value of Plan Assets
Plan assets at beginning of period . . . . . . . . . . . . . . .
Actual return on plan assets . . . . . . . . . . . . . . . . . . .
Company contributions . . . . . . . . . . . . . . . . . . . . . .
Benefit settlements . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan assets at end of period . . . . . . . . . . . . . . . . . . .
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . .
$154
3
4
(9)
(10)
142
$ (51)
$141
15
7
—
(9)
154
$ (38)
Retiree Health Plan
2014
2015
$ 2
—
—
—
—
—
$ 2
$—
—
—
—
—
—
$ 2
—
—
—
—
—
$ 2
$—
—
—
—
—
—
$ (2)
$ (2)
At the end of fiscal 2015 the Company had $45 million of net unrealized losses recorded in Accumulated other
comprehensive loss on the Consolidated Balance Sheets. The Company expects $2 million to be realized in fiscal 2016,
and the remaining to be recognized over the next 13 fiscal years.
The following table presents significant weighted-average assumptions used to determine benefit obligation and benefit
cost for the fiscal years ended:
(Percents)
Defined Benefit
Pension Plans
2015
2014
Weighted-average assumptions:
Discount rate for benefit obligation . . . . . . . . . . . . . .
Discount rate for net benefit cost
. . . . . . . . . . . . . . .
Expected return on plan assets for net benefit costs . . .
4.0
4.0
7.25
4.0
4.5
8.0
Retiree Health Plan
2014
2015
3.0
2.9
N/A
2.9
3.1
N/A
In evaluating the expected return on plan assets, Berry considered its historical assumptions compared with actual
results, an analysis of current market conditions, asset allocations, and the views of advisors. The return on plan assets
is derived from target allocations and historical yield by asset type. Health-care-cost trend rates were assumed to
increase at an annual rate of 7.0%. A one-percentage-point change in these assumed health care cost trend rates would
not have a material impact on our postretirement benefit obligation.
In accordance with the guidance from the FASB for employers’ disclosure about postretirement benefit plan assets the
table below discloses fair values of each pension plan asset category and level within the fair value hierarchy in which it
falls. There were no material changes or transfers between level 3 assets and the other levels.
52
Level 2
$—
Level 3
$—
Total
$ 8
Fiscal 2015 Asset Category
Level 1
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . .
U.S. large cap comingled equity funds . . . . . . . . . . . .
U.S. mid cap equity mutual funds . . . . . . . . . . . . . . .
U.S. small cap equity mutual funds . . . . . . . . . . . . . .
International equity mutual funds . . . . . . . . . . . . . . .
Real estate equity investment funds . . . . . . . . . . . . . .
Corporate bond mutual funds . . . . . . . . . . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . .
Guaranteed investment account . . . . . . . . . . . . . . . .
$ 8
—
24
2
6
3
21
—
—
37
—
—
—
—
—
31
—
—
—
—
—
—
—
—
10
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$64
$68
$10
Fiscal 2014 Asset Category
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . .
U.S. large cap comingled equity funds . . . . . . . . . . . .
U.S. mid cap equity mutual funds . . . . . . . . . . . . . . .
U.S. small cap equity mutual funds . . . . . . . . . . . . . .
International equity mutual funds . . . . . . . . . . . . . . .
Real estate equity investment funds . . . . . . . . . . . . . .
Corporate bond mutual funds . . . . . . . . . . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . .
Guaranteed investment account . . . . . . . . . . . . . . . .
Level 1
$ 7
Level 2
$—
Level 3
$—
—
27
6
10
3
28
—
—
47
—
—
—
—
—
15
—
—
—
—
—
—
—
—
11
37
24
2
6
3
21
31
10
$142
Total
$
7
47
27
6
10
3
28
15
11
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$81
$62
$11
$154
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid for the
fiscal year end:
Defined Benefit
Pension Plans
Retiree Health
Plan
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 – 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$10
10
10
10
11
56
$—
—
—
—
—
1
Net pension and retiree health benefit expense included the following components as of fiscal year end:
2015
2014
2013
Defined Benefit Pension Plans
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlement charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets
. . . . . . . . . . . . . . . . . . . . . . . . . .
Net periodic benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1
8
1
2
(12)
$ —
$ —
8
—
—
(11)
$ (3)
$ —
7
3
—
(10)
$ —
53
Our defined benefit pension plan asset allocations as of fiscal year end are as follows:
Asset Category
Equity securities and equity-like instruments . . . . . . . . . . . . . . . . . . .
Debt securities and debt-like . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
51%
37
12
100%
60%
28
12
100%
2015
2014
The Company’s retirement plan assets are invested with the objective of providing the plans the ability to fund current
and future benefit payment requirements while minimizing annual Company contributions. The retirement plans held
$17 million of the Company’s stock at the end of fiscal 2015. The Company re-addresses the allocation of its
investments on a regular basis.
10. Restructuring and Impairment Charges
The Company has announced various restructuring plans in the last three fiscal years which included shutting down
facilities in all four of the Company’s operating segments. In all instances, the majority of the operations from
rationalized facilities was transferred to other facilities within the respective division.
During fiscal 2013, the Company made the decision to exit certain operations in the Engineered Materials division.
This decision resulted in a non-cash impairment charges of $6 million related to certain intangible assets deemed to
have no further value recorded in Restructuring and impairment charges on the Consolidated Statement of Income.
The exited businesses were immaterial to the Company and the Engineered Materials segment.
During fiscal 2014, the Company initiated a cost reduction plan designed to deliver meaningful cost savings and
improved equipment utilization. The Company announced the intention to shut down four facilities, one each in Rigid
Open Top, Rigid Closed Top, Engineered Materials and Flexible Packaging divisions. The affected Rigid Open Top,
Rigid Closed Top, Engineered Materials, and Flexible Packaging businesses accounted for approximately $111 million,
$14 million, $9 million, and $28 million of annual net sales, respectively.
During fiscal 2015, the Company announced the intention to shut down two facilities, one each in the Rigid Open Top
and Engineered Materials divisions. The affected Rigid Open Top and Engineered Materials businesses accounted for
approximately $24 million and $16 million of annual net sales, respectively.
Since 2013, total expected costs attributed to restructuring programs total $60 million with $3 million remaining to be
recognized in the future.
Expected
Total Costs
Cumulative
charges
through
Fiscal 2015
To be
Recognized in
Future
Severance and termination benefits . . . . . . . . . . . . . . . . . .
Facility exit costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset impairment
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$18
27
15
$60
$18
24
15
$57
$—
3
—
$ 3
The tables below sets forth the significant components of the restructuring charges recognized for the fiscal years
ended, by segment:
Rigid Open Top . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rigid Closed Top . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Engineered Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Flexible Packaging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015
$5
3
1
4
Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$13
2014
$13
2
7
8
$30
2013
$ 1
3
9
1
$14
54
The table below sets forth the activity with respect to the restructuring accrual:
Employee
Severance
and Benefits
Facility Exit
Costs
Non-cash
charges
Balance as of fiscal 2013 . . . . . . . . . . . . . . . . . . . . . .
$ 2
Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash asset impairment
. . . . . . . . . . . . . . . . . . .
Cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9
—
(6)
Balance as of fiscal 2014 . . . . . . . . . . . . . . . . . . . . . .
$ 5
Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash asset impairment
. . . . . . . . . . . . . . . . . . .
Cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
—
(7)
Balance as of fiscal 2015 . . . . . . . . . . . . . . . . . . . . .
$ 2
$ 2
14
—
(8)
$ 8
7
—
(7)
$ 8
$—
7
(7)
—
$—
2
(2)
—
$—
Total
$ 4
30
(7)
(14)
$ 13
13
(2)
(14)
$ 10
11. Related Party Transactions
In connection with the term loan refinancing entered into in January 2014, the Company paid a $1 million
underwriting fee to Apollo Global Securities, LLC, an affiliate of Apollo that served as a manager of the offering.
The Company made payments related to the income tax receivable agreement (“TRA”) of $39 million in October 2014
and $32 million in October 2013, of which Apollo Global Management, LLC received $33 million and $28 million,
respectively. Mr. Robert V. Seminara, a member of the Company’s Board of Directors, has been employed by Apollo
since 2003.
12. Stockholders’ Equity
Equity Incentive Plans
In fiscal 2015, the Company adopted the 2015 Berry Plastics Group, Inc. Long-Term Incentive Plan (“2015 Plan”) to
align its incentive plans with plans of similar public companies by permitting for, among other things, the issuance of
performance-based awards. The 2015 Plan authorized the issuance of 7,500,000 shares, an increase of approximately 5
million over the remaining available for grant at the time of adoption. As of the adoption of the 2015 Plan, no shares
were permitted to be issued any other previous Incentive Plans.
The Company recognized total stock-based compensation expense of $21 million, $15 million, and $16 million for
fiscal 2015, 2014 and 2013. The intrinsic value of options exercised in fiscal 2015 was $41 million.
Information related to the equity incentive plans as of the fiscal year end is as follows:
2015
2014
Number Of
Shares
(in thousands)
Weighted
Average
Exercise Price
Number Of
Shares
(in thousands)
Weighted
Average
Exercise Price
Options outstanding, beginning of period. . . . . . . . . . . . .
Options granted . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options forfeited or cancelled . . . . . . . . . . . . . . . . . . . .
10,504
2,839
(1,929)
(63)
$13.13
28.78
9.07
17.59
Options outstanding, end of period. . . . . . . . . . . . . . . . .
11,351
$17.71
10,035
2,727
(2,137)
(121)
10,504
$ 9.96
21.02
8.19
15.20
$13.13
Option price range at end of period. . . . . . . . . . . . . . . . .
$3.04 – 33.91
$3.04 – 22.95
Options exercisable at end of period . . . . . . . . . . . . . . . .
Options available for grant at period end . . . . . . . . . . . . .
4,786
7,500
Weighted average fair value of options granted during
period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
9.51
5,098
5,349
$
7.53
55
The fair value for options granted has been estimated at the date of grant using a Black-Scholes model, generally with
the following weighted average assumptions:
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015
1.6%
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.00%
Volatility factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.30
Expected option life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7 years
2014
1.3%
0.00%
.33
7 years
2013
.6%
0.00%
.38
7 years
The following table summarizes information about the options outstanding as of fiscal 2015:
Range of Exercise Prices
Number
Outstanding
Intrinsic
Value of
Outstanding
Weighted
Remaining
Contractual
Life
Weighted
Exercise
Price
Number
Exercisable
Intrinsic
Value of
Exercisable
Unrecognized
Compensation
Weighted
Recognition
Period
$3.04 – 33.91 . . . . . . . .
11,351
$143
7 years
$17.71
4,786
$92
$25
2 years
13. Segment and Geographic Data
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, France, Australia, Germany, Brazil, Malaysia, India, China, and the Netherlands. The
North American operation represents 95% of the Company’s net sales, 96% of total long-lived assets, and 95% of the
total assets. Selected information by reportable segment is presented in the following table.
2015
2014
2013
Net sales
Rigid Open Top . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rigid Closed Top . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Engineered Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Flexible Packaging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income
Rigid Open Top . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rigid Closed Top . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Engineered Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Flexible Packaging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,055
1,474
1,397
955
$4,881
$
71
139
143
55
$1,110
1,469
1,455
924
$4,958
$
34
132
125
25
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 408
$ 316
Depreciation and amortization
Rigid Open Top . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rigid Closed Top . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Engineered Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Flexible Packaging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
93
131
68
58
$
92
133
75
58
$1,127
1,387
1,397
736
$4,647
$ 123
130
116
17
$ 386
$
90
129
71
51
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 350
$ 358
$ 341
56
Total assets:
Rigid Open Top . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rigid Closed Top . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Engineered Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Flexible Packaging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,765
1,852
679
732
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$5,028
$1,812
1,953
726
761
$5,252
2015
2014
Goodwill:
Rigid Open Top . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 681
$ 681
Rigid Closed Top . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Engineered Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Flexible Packaging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
823
69
79
827
71
80
Total goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,652
$1,659
14. 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 Company’s redeemable common stock is included in the weighted-average number of common shares
outstanding for calculating basic and diluted net income per share.
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 fiscal year end.
(in millions, except per share amounts)
2015
2014
2013
Numerator
Net income attributable to the Company . . . . . . . . . . . . . . . . . . . . .
$
86
$
62
$
57
Denominator
Weighted average common shares outstanding – basic . . . . . . . . . . . .
Dilutive shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
119.1
4.3
Weighted average common and common equivalent shares
outstanding – diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
123.4
Per common share income (loss)
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 0.72
$ 0.70
116.9
4.6
121.5
$ 0.53
$ 0.51
113.5
6.0
119.5
$ 0.50
$ 0.48
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
57
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
Fiscal 2015
Parent
Issuer
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminations
Total
$3,807
3,128
$452
358
Net sales . . . . . . . . . . . . . . . . . . . . . . . .
$ — $ 622
Cost of goods sold . . . . . . . . . . . . . . . . .
Selling, general and administrative . . . . . .
Amortization of intangibles . . . . . . . . . .
Restructuring and impairment charges . . .
Operating income . . . . . . . . . . . . . . . . .
Debt extinguishment . . . . . . . . . . . . . . .
Other expense (income), net . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . .
Equity in net income of subsidiaries. . . . .
Income (loss) before income taxes . . . . . .
Income tax expense (benefit) . . . . . . . . . .
Consolidated net income (loss) . . . . . . . .
Net income (loss) attributable to
—
—
—
—
—
—
(3)
—
(119)
122
36
86
526
64
8
—
24
94
—
25
(210)
115
25
90
non-controlling interests . . . . . . . . . . .
—
—
244
75
13
347
—
3
148
—
196
—
196
—
Net income (loss) attributable to the
Company . . . . . . . . . . . . . . . . . . . . .
$ 86
$ 90
$ 196
Currency translation . . . . . . . . . . . . . . .
Interest rate hedges . . . . . . . . . . . . . . . .
Defined benefit pension and retiree
benefit plans . . . . . . . . . . . . . . . . . . .
Provision for income taxes related to other
comprehensive income items . . . . . . . .
—
—
—
—
—
(33)
(16)
18
—
—
—
—
49
8
—
37
—
1
18
—
18
4
14
—
$ 14
(45)
—
—
—
$ —
—
—
—
—
—
—
—
—
329
(329)
(29)
(300)
—
$4,881
4,012
357
91
13
408
94
1
191
—
122
36
86
—
$(300)
$
86
—
—
—
—
(45)
(33)
(16)
18
10
Comprehensive income (loss) . . . . . . . . .
$ 86
$ 59
$ 196
$ (31)
$(300)
$
58
Parent
Issuer
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminations
Total
Fiscal 2014
Net sales . . . . . . . . . . . . . . . . . . . . . . . .
$ — $ 638
Cost of goods sold . . . . . . . . . . . . . . . . .
Selling, general and administrative . . . . . .
Amortization of intangibles . . . . . . . . . .
Restructuring and impairment charges
. .
Operating income . . . . . . . . . . . . . . . . .
Debt extinguishment . . . . . . . . . . . . . . .
Other income, net . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . .
Equity in net income of subsidiaries. . . . .
Income (loss) before income taxes . . . . . .
Income tax expense (benefit) . . . . . . . . . .
Consolidated net income (loss) . . . . . . . .
Net income (loss) attributable to
non-controlling interests . . . . . . . . . . .
Net income (loss) attributable to the
—
—
—
—
—
—
(3)
34
(98)
67
4
63
1
557
52
10
—
19
35
—
27
(218)
175
44
131
—
$3,904
3,284
232
84
30
274
—
(4)
176
—
102
—
102
—
Company . . . . . . . . . . . . . . . . . . . . .
$ 62
$ 131
$ 102
Currency translation . . . . . . . . . . . . . . .
Interest rate hedges . . . . . . . . . . . . . . . .
Defined benefit pension and retiree
benefit plans . . . . . . . . . . . . . . . . . . .
Provision for income taxes related to other
comprehensive income items . . . . . . . .
—
—
—
—
—
(3)
(11)
5
—
—
—
—
$416
349
36
8
—
23
—
—
(97)
—
120
5
115
—
$115
(16)
—
—
—
$ —
—
—
—
—
—
—
—
81
316
(397)
(49)
(348)
—
$4,958
4,190
320
102
30
316
35
(7)
221
—
67
4
63
1
$(348)
$
62
—
—
—
—
(16)
(3)
(11)
5
37
Comprehensive income (loss) . . . . . . . . .
$ 62
$ 122
$ 102
$ 99
$(348)
$
59
Parent
Issuer
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminations
Total
Fiscal 2013
$4,647
3,835
412
14
386
57
244
—
85
28
57
(5)
20
34
(20)
Net sales . . . . . . . . . . . . . . . . . . . . . . . .
$ — $ 571
Cost of sales . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . . . . . . .
Restructuring and impairment charges,
net . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income (loss) . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . .
—
—
—
—
—
47
506
58
1
6
56
24
Equity in net income of subsidiaries. . . . .
(132)
(297)
Net income (loss) before income taxes . . .
Income tax expense (benefit)
. . . . . . . . .
85
28
223
80
$3,706
3,021
$ 370
308
314
13
358
1
201
—
156
—
40
—
22
—
(120)
—
142
2
$ —
—
—
—
—
—
92
429
(521)
(82)
Net income (loss)
. . . . . . . . . . . . . . . . .
$ 57
$ 143
$ 156
$ 140
$(439)
$
Currency translation . . . . . . . . . . . . . . .
Interest rate hedges . . . . . . . . . . . . . . . .
Defined benefit pension and retiree
benefit plans . . . . . . . . . . . . . . . . . . .
Provision for income taxes related to other
comprehensive income items . . . . . . . .
—
—
—
—
—
20
34
(20)
—
—
—
—
(5)
—
—
—
—
—
—
—
Comprehensive income (loss) . . . . . . . . .
$ 57
$ 177
$ 156
$ 135
$(439)
$
86
60
Condensed Supplemental Consolidated Balance Sheet
As of fiscal year end 2015
Parent
Issuer
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminations
Total
Assets
Current assets:
Cash and cash equivalents. . . . . . . . . . . .
$ — $ 163
$ —
$ 65
$ —
$ 228
Accounts receivable, net . . . . . . . . . . . . .
Intercompany receivable . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . .
Prepaid expenses and other current . . . . .
Total current assets . . . . . . . . . . . . . . . .
Property, plant and equipment, net . . . . .
Intangible assets, net . . . . . . . . . . . . . . .
Investment in subsidiaries . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . .
—
329
—
162
—
491
—
—
75
—
23
2,963
49
—
22
3,220
79
97
1,456
—
337
—
425
—
5
767
1,111
2,151
—
1
74
83
48
—
10
280
104
101
—
1
—
(3,375)
—
—
—
(3,375)
—
—
(1,531)
—
434
—
522
162
37
1,383
1,294
2,349
—
2
Total assets . . . . . . . . . . . . . . . . . . . . . .
$566
$4,852
$4,030
$486
$(4,906)
$5,028
Liabilities and equity
Current liabilities:
Accounts payable. . . . . . . . . . . . . . . . . .
Accrued expenses and other current
liabilities . . . . . . . . . . . . . . . . . . . . . .
Intercompany payable . . . . . . . . . . . . . .
Current portion of long-term debt . . . . . .
Total current liabilities . . . . . . . . . . . . . .
Long-term debt, less current portion . . . .
Deferred income taxes . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . .
Total long-term liabilities . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . .
Redeemable non-controlling interests . . . .
Other equity (deficit) . . . . . . . . . . . . . . .
Total equity (deficit). . . . . . . . . . . . . . . .
$ — $
28
$ 245
$ 57
$ —
$ 330
57
—
—
57
—
387
175
562
619
12
(65)
(65)
140
—
37
205
3,647
—
122
3,769
3,974
—
878
878
121
3,375
—
3,741
—
—
39
39
3,780
—
250
250
20
—
—
77
1
—
5
6
83
—
403
403
$486
—
(3,375)
—
(3,375)
—
—
—
—
(3,375)
—
(1,531)
(1,531)
338
—
37
705
3,648
387
341
4,376
5,081
12
(65)
(65)
$(4,906)
$5,028
Total liabilities and equity (deficit) . . . . . .
$566
$4,852
$4,030
61
Condensed Supplemental Consolidated Balance Sheet
As of fiscal year end 2014
Parent
Issuer
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminations
Total
Assets
Current assets:
Cash and cash equivalents . . . . . . . . . . .
$ — $
Accounts receivable, net of allowance . . . .
Intercompany receivable . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . .
Prepaid expenses and other current . . . . .
Total current assets . . . . . . . . . . . . . . . .
Property, plant and equipment, net . . . . .
Intangible assets, net . . . . . . . . . . . . . . .
Investment in subsidiaries . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . .
—
319
—
166
—
485
—
—
69
—
70
35
3,343
51
—
15
3,514
84
104
1,237
—
$
15
377
—
496
—
13
901
1,162
2,226
—
1
$ 44
$ —
$ 129
79
87
57
—
14
281
118
125
—
—
—
(3,749)
—
—
—
(3,749)
—
—
(1,306)
—
491
—
604
166
42
1,432
1,364
2,455
—
1
Total assets . . . . . . . . . . . . . . . . . . . . . .
$ 554
$4,939
$4,290
$524
$(5,055)
$5,252
Liabilities and equity
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . .
Accrued and other current liabilities . . . .
Intercompany payable . . . . . . . . . . . . . .
Long-term debt-current portion . . . . . . .
Total current liabilities . . . . . . . . . . . . . .
Long-term debt, less current portion . . . .
Deferred tax liabilities . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . .
Total long-term liabilities . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . .
Redeemable non-controlling interests . . . .
Other equity (deficit) . . . . . . . . . . . . . . .
Total equity (deficit). . . . . . . . . . . . . . . .
$ — $
35
—
—
31
127
—
54
212
35
— 3,842
—
386
76
234
620
655
13
(114)
(114)
3,918
4,130
—
809
809
$ 303
132
3,749
—
4,184
—
—
42
42
4,226
—
64
64
Total liabilities and equity (deficit) . . . . . .
$ 554
$4,939
$4,290
$ 61
20
—
4
85
2
—
4
6
91
—
433
433
$524
$ —
—
(3,749)
—
(3,749)
—
—
—
—
(3,749)
(1,306)
(1,306)
$ 395
314
—
58
767
3,844
386
356
4,586
5,353
13
(114)
(114)
$(5,055)
$5,252
62
Condensed Supplemental Consolidated Statements of Cash Flows
Fiscal 2015
Parent
Issuer
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminations
Total
Cash Flow from Operating Activities . . . . .
$ — $ 60
$ 542
$34
$
1
$ 637
Cash Flow from Investing Activities
Additions to property, plant, and
equipment . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of assets . . . . . . . . . .
Investment in Parent . . . . . . . . . . . . . . .
(Contributions) distributions to/from
subsidiaries . . . . . . . . . . . . . . . . . . . .
Intercompany advances (repayments) . . . .
Acquisition of business, net of cash
acquired . . . . . . . . . . . . . . . . . . . . . .
Net cash from investing activities . . . . . .
Cash Flow from Financing Activities
Proceeds from long-term borrowings . . . .
Payment of tax receivable agreement . . . .
Proceed from issuance of common stock .
Repayment of note receivable . . . . . . . . .
Repayment of long-term borrowings . . . .
Changes in intercompany balances . . . . .
Contribution from Parent . . . . . . . . . . . .
Debt financing costs. . . . . . . . . . . . . . . .
Net cash from financing activities . . . . . .
Effect of currency translation on cash . . .
Net change in cash and cash equivalents . .
Cash and cash equivalents at beginning of
period . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at end of
—
—
—
(18)
—
—
(18)
—
(39)
18
—
—
39
—
—
18
—
—
—
(13)
—
—
18
368
—
373
693
—
—
—
(947)
—
—
(86)
(340)
—
93
70
(164)
18
—
—
—
(3)
(149)
—
—
—
—
—
(408)
—
—
(408)
—
(15)
15
(3)
—
—
—
—
—
(3)
—
—
—
—
(4)
2
—
—
(2)
(8)
21
44
—
—
—
—
(368)
—
(368)
—
—
—
—
—
367
—
—
367
—
—
—
(180)
18
—
—
—
(3)
(165)
693
(39)
18
—
(951)
—
—
(86)
(365)
(8)
99
129
period . . . . . . . . . . . . . . . . . . . . . . . .
$ — $ 163
$ —
$65
$ —
$ 228
63
Cash Flow from Operating Activities . . . . .
$ — $
27
$ 473
$ 30
$ —
$
530
Parent
Issuer
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminations
Total
Fiscal 2014
Cash Flow from Investing Activities
Additions to property, plant, and
equipment
. . . . . . . . . . . . . . . . . . . .
Proceeds from sale of assets . . . . . . . . . .
Investment in Parent . . . . . . . . . . . . . . .
(Contributions) distributions to/from
subsidiaries . . . . . . . . . . . . . . . . . . . .
Intercompany advances (repayments)
. . .
Investment in Issuer debt securities . . . . .
Acquisition of business, net of cash
acquired . . . . . . . . . . . . . . . . . . . . . .
Net cash from investing activities . . . . . .
Cash Flow from Financing Activities
Proceeds from long-term borrowings . . . .
Proceeds from initial public offering . . . . .
Payment of tax receivable agreement . . . .
Proceed from issuance of common stock .
Repayment of note receivable . . . . . . . . .
Repayment of long-term borrowings . . . .
Changes in intercompany balances . . . . .
Contribution from Parent . . . . . . . . . . . .
Debt financing costs. . . . . . . . . . . . . . . .
Net cash from financing activities . . . . . .
Effect of currency translation on cash . . .
Net change in cash and cash
equivalents. . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of
period . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at end of
—
—
—
723
—
—
—
723
—
—
(32)
17
—
(740)
32
—
—
(723)
—
—
—
(6)
—
—
(2)
20
—
—
12
1,627
—
—
—
—
(1,668)
—
—
(44)
(85)
—
(46)
116
(200)
19
—
—
—
—
(136)
(317)
—
—
—
—
—
—
(141)
—
—
(141)
—
15
—
(9)
—
—
721
—
—
(90)
622
—
—
—
—
—
—
89
(721)
—
(632)
(2)
18
26
—
—
—
(1,442)
(20)
—
—
(1,462)
—
—
—
—
—
721
20
721
—
1,462
—
—
—
(215)
19
—
—
—
—
(226)
(422)
1,627
—
(32)
17
—
(1,687)
—
—
(44)
(119)
(2)
(13)
142
period . . . . . . . . . . . . . . . . . . . . . . .
$ — $
70
$ 15
$ 44
$ —
$
129
64
Cash Flow from Operating Activities . . . . .
$ — $
11
$ 417
$ 36
$ —
$
464
Parent
Issuer
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Eliminations
Total
Fiscal 2013
Cash Flow from Investing Activities
Additions to property, plant, and
equipment . . . . . . . . . . . . . . . . . . . . .
Proceeds from disposal of assets . . . . . . .
Investment in Parent . . . . . . . . . . . . . . .
—
—
—
(Contributions) distributions to/from
subsidiaries . . . . . . . . . . . . . . . . . . . .
(462)
Intercompany advances (repayments) . . . .
Investment in Issuer debt securities . . . . .
Acquisition of business net of cash
acquired . . . . . . . . . . . . . . . . . . . . . .
—
—
—
Net cash from investing activities . . . . . .
(462)
(7)
1
—
441
210
—
—
645
Cash Flow from Financing Activities
Proceeds from long-term debt . . . . . . . . .
IPO proceeds. . . . . . . . . . . . . . . . . . . . .
Payment of TRA . . . . . . . . . . . . . . . . .
Proceed from issuance of common
stock. . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of note receivable . . . . . . . . .
Repayment of long-term debt . . . . . . . . .
Changes in intercompany balances. . . . . .
Contribution from Parent . . . . . . . . . . . .
Deferred financing costs . . . . . . . . . . . . .
—
438
(5)
1,391
—
(5)
27
—
2
2
— (1,955)
—
—
—
—
(39)
—
Net cash from financing activities . . . . . .
462
(606)
Net change in cash and cash
equivalents. . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of
period . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at end of
—
—
50
66
(218)
17
—
—
—
—
(24)
(225)
—
—
—
—
—
—
(192)
—
—
(192)
—
—
(14)
—
(21)
—
—
—
—
(35)
—
—
—
—
—
(2)
(15)
21
—
4
5
21
—
—
21
21
(210)
—
—
(168)
—
—
5
—
(2)
(21)
207
(21)
—
168
—
—
(239)
18
—
—
—
—
(24)
(245)
1,391
438
(5)
27
2
(1,978)
—
—
(39)
(164)
55
87
period . . . . . . . . . . . . . . . . . . . . . . . .
$ — $
116
$ —
$ 26
$ —
$
142
65
16. Quarterly Financial Data (Unaudited)
The following table contains selected unaudited quarterly financial data for fiscal years ended.
2015
2014
First
Second
Third
Fourth
First
Second
Third
Fourth
Net sales . . . . . . . . . . . . . . . . . . . . . . . .
$1,220
$1,224
$1,241
$1,196
$1,140
$1,210
$1,298
$1,310
Cost of sales . . . . . . . . . . . . . . . . . . . . .
1,037
Gross profit . . . . . . . . . . . . . . . . . . . . . .
183
997
227
1,003
238
975
221
964
176
1,023
1,089
1,114
187
209
196
Net income (loss) attributable to the
Company . . . . . . . . . . . . . . . . . . . . . .
$
13
$
38
$ (13) $
48
$
6
$
12
$
15
$
29
Net income (loss) attributable to the
Company per share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . .
0.11
0.11
0.32
0.31
(0.11)
(0.11)
0.40
0.39
0.05
0.05
0.10
0.10
0.13
0.12
0.25
0.24
17. Subsequent Events
AVINTIV Inc.
In October 2015, the Company acquired 100% of the capital stock of AVINTIV Inc. (“Avintiv”) for a purchase price of
$2.3 billion which is preliminary, unaudited 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. With 23 locations in 14 countries, an employee base of over 4,500 people, and the broadest
range of process technologies in the industry, Avintiv’s strategically located manufacturing facilities position it as a
global supplier to many of the same leading consumer and industrial product manufacturers that the Company
supplies and utilize similar key raw materials as the Company’s existing business. The acquired business will primarily
be operated in Berry’s newly announced Health, Hygiene and 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
will be allocated to the identifiable assets and liabilities based on preliminary fair values at the acquisition date. The
Company is in the process of determining the allocation of the purchase price to the fair value on fixed assets,
intangibles, deferred income taxes and reviewing all of the working capital acquired. The preliminary unaudited
allocation of purchase price and estimated fair values of acquired assets and assumed liabilities consisted of working
capital of $181 million, property and equipment of $969 million, intangible assets of $586 million, goodwill of $802
million, other assets of $46 million, a net deferred tax liability of $114 million, and other long-term liabilities of $207
million.
Unaudited pro forma net sales were $6,739 million and $6,666 million and unaudited pro forma net losses were $40
million and $47 million for fiscal 2015 and fiscal 2014, respectively. The unaudited pro forma net sales and net loss
assume that the Avintiv acquisition had occurred as of the beginning of the respective periods. The results of the
Providência and Dounor acquisitions have been included in Avintiv’s operations since June 11, 2014 and April 17,
2015, respectively. However, no pro forma adjustments have been made with respect to their operations prior to the
date of acquisition by Avintiv as these acquisitions were not considered significant to Berry under Regulation S-X.
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 respective 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.
66
Business Reorganization
In November 2015 the Company reorganized into three operating segments: Health, Hygiene and Specialties,
Consumer Packaging, and Engineered Materials. The Health, Hygiene and Specialties segment will include the recently
acquired Avintiv business and personal care films and international business that historically reported in our Flexible
Packaging segment. The Consumer Packaging segment will consist of our historical Rigid Open Top segment, Rigid
Closed Top segment, the food and consumer films business that historically reported in our Flexible Packaging
segment, and the custom shrink films business that was historically reported in our Engineered Materials segment. The
Engineered Material segment will include the old Engineered Material segment, excluding the custom shrink films
business, and the converter films business that was historically reported in our Flexible Packaging segment. Beginning
with our results for the first quarter of fiscal 2016, we will report results based on our new operating segment structure.
67
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 23rd day of
November, 2015.
SIGNATURES
BERRY PLASTICS GROUP, INC.
By /s/ Jonathan D. Rich
Jonathan D. Rich
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature
Title
Date
/s/ Jonathan D. Rich
Jonathan D. Rich
/s/ Mark W. Miles
Mark W. Miles
/s/ James M. Till
James M. Till
/s/ B. Evan Bayh
B. Evan Bayh
/s/ Jonathan F. Foster
Jonathan F. Foster
/s/ Stephen E. Sterrett
Stephen E. Sterrett
/s/ Idalene F. Kesner
Idalene F. Kesner
/s/ Carl J. Rickertsen
Carl J. Rickertsen
/s/ Ronald S. Rolfe
Ronald S. Rolfe
/s/ Robert V. Seminara
Robert V. Seminara
/s/ Robert A. Steele
Robert A. Steele
Chairman of the Board of Directors,
Chief Executive Officer and Director
(Principal Executive Officer)
November 23, 2015
Chief Financial Officer
(Principal Financial Officer)
November 23, 2015
Executive Vice President and Controller
(Principal Accounting Officer)
November 23, 2015
Director
November 23, 2015
Director
November 23, 2015
Director
November 23, 2015
Director
November 23, 2015
Director
November 23, 2015
Director
November 23, 2015
Director
November 23, 2015
Director
November 23, 2015
68
Exhibit
No.
2.1
3.1
3.2
4.1
4.2
4.3
4.4
4.5
10.1
10.2
10.3*
[Description of Exhibit]
Agreement and Plan of Merger, dated as of July 30, 2015, by and among AVINTIV Inc., Berry Plastics
Group, Inc., Berry Plastics Acquisition Corporation IX and Blackstone Capital Partners (Cayman) V
L.P., as the security holder representative (the Exhibits and Disclosure Schedules have been omitted
pursuant to Item 601(b)(2) of Regulation S-K and will be provided to the SEC upon request)
(incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on August 5, 2015).
Amended and Restated Certificate of Incorporation of Berry Plastics Group, Inc. (incorporated by
reference to Exhibit 3.1 to the Company’s Form 8-K filed on March 10, 2015).
Amended and Restated Bylaws of Berry Plastics Group, Inc. (incorporated herein by reference to
Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on January 29, 2014).
Indenture, dated as of May 12, 2014, by and among Berry Plastics Corporation, the guarantors party
thereto and U.S. Bank National Association, as Trustee, relating to the 5.50% second priority senior
secured notes due 2022 (incorporated herein by reference to Exhibit 4.2 of the Company’s Current Report
on Form 8-K filed on May 13, 2014).
Indenture, dated as of June 5, 2015, by and among Berry Plastics Corporation, the guarantors party
thereto and U.S. Bank National Association, as Trustee, relating to the 5.125% second priority senior
secured notes due 2023 (incorporated by reference to Exhibit 4.2 to the Company’s Form 8-K filed on
June 5, 2015).
Indenture, dated as of October 1, 2015, by and between Berry Plastics Escrow Corporation, as Issuer, and
U.S. Bank National Association, as Trustee, relating to the 6.00% second priority senior secured notes due
2022 (incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on October 6, 2015).
First Supplemental Indenture, dated as of October 1, 2015, by and between Berry Plastics Corporation,
Berry Plastics Group, Inc., the subsidiaries of Berry Plastics Corporation party thereto, Berry Plastics
Escrow Corporation, and U.S. Bank National Association, as Trustee, relating to the Indenture, by and
between Berry Plastics Escrow Corporation, as Issuer, and U.S. Bank, National Association, as Trustee,
relating to the 6.00% second priority senior secured notes due 2022, dated October 1, 2015 (incorporated
by reference to Exhibit 4.1 to the Company’s Form 8-K filed on October 6, 2015).
Registration Rights Agreement, dated as of October 1, 2015, by and between Berry Plastics Corporation,
Berry Plastics Group, Inc., each subsidiary of Berry Plastics Corporation identified therein, and
Goldman, Sachs & Co., and Credit Suisse, on behalf of themselves and as representatives of the initial
purchasers, relating to the 6.00% second priority senior secured notes due 2022 (incorporated by reference
to Exhibit 4.1 to the Company’s Form 8-K filed on October 6, 2015).
$650,000,000 Second Amended and Restated Revolving Credit Agreement, dated as of May 14, 2015, by
and among Berry Plastics Corporation., Berry Plastics Group, Inc., certain domestic subsidiaries party
thereto from time to time, Bank of America, N.A., as collateral agent and administrative agent, the
lenders party thereto from time to time, and the financial institutions party thereto, which is attached to
Amendment No. 4 to Amended and Restated Revolving Credit Agreement dated as of April 3, 2007
(incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on May 14, 2015).
U.S. $1,200,000,000 Second Amended and Restated Credit Agreement, dated as of April 3, 2007, by and
among Berry Plastics Corporation formerly known as Berry Plastics Holding Corporation, Berry Plastics
Group, Inc., Credit Suisse, Cayman Islands Branch, as collateral and administrative agent, the lenders
party thereto from time to time, and the other financial institutions party thereto (incorporated herein by
reference to Exhibit 10.1(b) to Berry Plastics Corporation’s (File No. 033-75706-01) Current Report on
Form 8-K filed on April 10, 2007).
Second Amended and Restated Intercreditor Agreement, dated as of February 5, 2008, by and among
Berry Plastics Group, Inc., Berry Plastics Corporation, certain subsidiaries identified as parties thereto,
Bank of America, N.A. and Credit Suisse, Cayman Islands Branch as first lien agents, and U.S. Bank
National Association, as successor in interest to Wells Fargo Bank, N.A., as trustee.
69
Exhibit
No.
10.4
10.5
10.6*
10.7
10.8
10.9
10.10
10.11
10.12†
10.13†
10.14†
10.15†
10.16†
[Description of Exhibit]
U.S. $1,400,000,000 Incremental Assumption Agreement, dated as of February 8, 2013, by and among
Berry Plastics Group, Inc., Berry Plastics Corporation and certain of its subsidiaries referenced therein
and Credit Suisse AG, Cayman Islands Branch (incorporated herein by reference to Exhibit 10.29 to the
Registrant’s Registration Statement on Form S-1 (Reg. No. 333-187740) filed on April 4, 2013).
U.S. $1,125,000,000 Incremental Assumption Agreement, dated as of January 6, 2014, by and among
Berry Plastics Group, Inc., Berry Plastics Corporation and certain of its subsidiaries referenced therein
and Credit Suisse AG, Cayman Islands Branch as an incremental term lender, and Credit Suisse AG,
Cayman Islands Branch as administrative agents for the lenders under the credit agreement referenced
therein (incorporated herein by reference to Exhibit 10.2 to the Company’s Form 10-Q filed on
January 31, 2014).
U.S. $2,100,000,000 Incremental Assumption Agreement and Amendment, dated as of October 1, 2015,
by and among Berry Plastics Group, Inc., Berry Plastics Corporation and certain of its subsidiaries
referenced therein and Credit Suisse AG, Cayman Islands Branch as an incremental term lender, and
Credit Suisse AG, Cayman Islands Branch as administrative agents for the lenders under the credit
agreement referenced therein.
Equipment Lease Agreement, dated as of June 24, 2010, between Gossamer Holdings, LLC, as Lessor,
and Chicopee, Inc., as Lessee (incorporated by reference to Exhibit 10.1 to AVINTIV Specialty Materials
Inc.’s Quarterly Report on Form 10-Q filed with the SEC on August 17, 2010).
Amendment and Waiver to Equipment Lease Agreement, dated as of January 19, 2011, between
Chicopee, Inc., as Lessee and Gossamer Holdings, LLC, as Lessor (incorporated by reference to
Exhibit 10.16 to AVINTIV Specialty Materials Inc.’s Registration Statement Form S-4
(Reg. No. 333-177497) filed on October 25, 2011).
Second Amendment to Equipment Lease Agreement, dated as of October 7, 2011, between Chicopee,
Inc., as Lessee and Gossamer Holdings, LLC, as Lessor (incorporated by reference to Exhibit 10.17 to
AVINTIV Specialty Materials Inc.’s Registration Statement Form S-4 (Reg. No. 333-177497) filed on
October 25, 2011).
Third Amendment to Equipment Lease Agreement, dated as of February 28, 2012, between Chicopee,
Inc., as Lessee and Gossamer Holdings, LLC, as Lessor (incorporated by reference to Exhibit 10.1 to
AVINTIV Specialty Materials Inc.’s Quarterly Report on Form 10-Q filed on May 15, 2012).
Fourth Amendment to Equipment Lease Agreement, dated as of March 22, 2013, between Chicopee, Inc.,
as Lessee and Gossamer Holdings, LLC, as Lessor (incorporated by reference to Exhibit 10.1 to
AVINTIV Specialty Materials Inc.’s Quarterly Report on Form 10-Q filed May 9, 2013).
2006 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.8 to Berry Plastics
Corporation’s Registration Statement Form S-4 (Reg. No. 333-138380) filed on November 2, 2006).
Amendment No. 2 to the Berry Plastics Group, Inc., 2006 Equity Incentive Plan (incorporated herein by
reference to Exhibit 10.9 to the Company’s Form 10-K filed on December 11, 2013).
Amendment No. 3 to Berry Plastics Group, Inc. 2006 Equity Incentive Plan (incorporated by reference to
Exhibit 10.1 to the Company’s Form 8-K filed on March 10, 2015).
Omnibus amendment to awards granted under the Berry Plastics Group, Inc., 2006 Long-Term Incentive
Plan (incorporated herein by reference to Exhibit 10.10 to the Company’s Form 10-K filed on
December 11, 2013).
Form of Performance-Based Stock Option Agreement of Berry Plastics Group, Inc. (incorporated herein
by reference to Exhibit 10.9 to Berry Plastics Corporation’s Registration Statement Form S-4
(Reg. No. 333-138380) filed on November 2, 2006).
70
Exhibit
No.
10.17†
10.18†
10.19†
10.20†
10.21†
10.22
10.23†
10.24†
10.25†
10.26†
10.27†
10.28†
10.29†
10.30†
10.31†
10.32†
[Description of Exhibit]
Form of Accreting Stock Option Agreement of Berry Plastics Group, Inc. (incorporated herein by
reference to Exhibit 10.10 to Berry Plastics Corporation’s Registration Statement Form S-4
(Reg. No. 333-138380) filed on November 2, 2006).
Form of Time-Based Stock Option Agreement of Berry Plastics Group, Inc. (incorporated herein by
reference to Exhibit 10.11 to Berry Plastics Corporation’s Registration Statement Form S-4
(Reg. No. 333-138380) filed on November 2, 2006).
Form of Performance-Based Stock Appreciation Rights Agreement of Berry Plastics Group, Inc.
(incorporated herein by reference to Exhibit 10.12 to Berry Plastics Corporation’s Registration Statement
Form S-4 (Reg. No. 333-138380) filed on November 2, 2006).
Employment Agreement, dated April 3, 2007, between Berry Plastics Corporation and Thomas E. Salmon
(incorporated herein by reference to Exhibit 10.20 of Berry Plastics Corporation’s (File No. 033-75706-01)
Annual Report on Form 10-K filed with the SEC on December 16, 2008).
Employment Agreement, dated October 1, 2010, between the Berry Plastics Corporation and Jonathan
Rich (incorporated herein by reference to Exhibit 10.2 of Berry Plastics Corporation’s
(File No. 033-75706-01) Current Report on Form 8-K filed on October 6, 2010).
Form of common stock certificate of Berry Plastics Group, Inc. (incorporated by reference to Exhibit 4.27
of Amendment No. 5 to the Company’s Registration Statement on Form S-1 (File No. 333-180294) filed
on September 19, 2012).
Income Tax Receivable Agreement, dated as of November 29, 2012, by and among Berry Plastics Group,
Inc. and Apollo Management Fund VI, L.P. (incorporated herein by reference to Exhibit 10.25 to the
Company’s Form 10-K filed on December 27, 2012).
Berry Plastics Group, Inc. Executive Bonus Plan (incorporated herein by reference to Exhibit 10.26 to the
Company’s Form 10-K filed on December 27, 2012).
Berry Plastics Group, Inc. 2012 Long-Term Incentive Plan (incorporated herein by reference to
Exhibit 10.27 to the Company’s Form 10-K filed on December 27, 2012).
Amendment No. 1 to the Berry Plastics Group, Inc. 2012 Long-Term Incentive Plan (incorporated herein
by reference to Exhibit 10.31 to the Company’s Form 10-K filed on December 11, 2013).
Omnibus amendment to awards granted under the Berry Plastics Group, Inc., 2012 Long-Term Incentive
Plan (incorporated herein by reference to Exhibit 10.32 to the Company’s Form 10-K filed on
December 11, 2013).
Amendment No. 2 to the Berry Plastics Group, Inc. 2012 Long-Term Incentive Plan (incorporated by
reference to Exhibit 10.2 to the Company’s Form 8-K filed on March 10, 2015).
2015 Berry Plastics Group, Inc. Long-Term Incentive Plan (incorporated by reference to Exhibit 10.3 to
the Company’s Form 8-K filed on March 10, 2015).
Fourth Amended and Restated Stockholders Agreement, by and among Berry Plastics Group, Inc., and
the stockholders of the Corporation listed on schedule A thereto, dated as of January 15, 2015
(incorporated herein by reference to Exhibit 10.1 to the Company’s Form 10-Q filed on January 30, 2015).
Employment Agreement, dated January 1, 2002, between the Berry Plastics Corporation and Curtis Begle
(incorporated herein by reference to Exhibit 10.1 to the Company’s Form 10-Q filed on January 31, 2014).
Amendment No. 1 to Employment Agreement, dated as of September 13, 2006, by and between the Berry
Plastics Corporation and Curtis Begle (incorporated herein by reference to Exhibit 10.3 to the Company’s
Form 10-Q filed on January 31, 2014).
71
Exhibit
No.
10.33†
10.34†
10.35†
12.1*
21.1*
23.1*
31.1*
31.2*
32.1*
32.2*
101.*
[Description of Exhibit]
Amendment No. 2 to Employment Agreement, dated December 31, 2008, by and between the Berry
Plastics Corporation and Curtis Begle (incorporated herein by reference to Exhibit 10.4 to the Company’s
Form 10-Q filed on January 31, 2014).
Amendment No. 3 to Employment Agreement, dated August 1, 2010, by and between the Berry Plastics
Corporation and Curtis L. Begle (incorporated herein by reference to Exhibit 10.5 to the Company’s
Form 10-Q filed on January 31, 2014).
Amendment No. 4 to Employment Agreement, dated December 16, 2011, by and between the Berry
Plastics Corporation and Curtis L. Begle (incorporated herein by reference to Exhibit 10.6 to the
Company’s Form 10-Q filed on January 31, 2014).
Computation of Ratio of Earnings to Fixed Charges.
Subsidiaries of the Registrant.
Consent of Independent Registered Public Accounting Firm
Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer
Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer
Section 1350 Certification of the Chief Executive Officer
Section 1350 Certification of the Chief Financial Officer
Interactive Data Files
*
†
Filed herewith.
Management contract or compensatory plan or arrangement.
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STOCKHOLDER INFORMATION
CORPORATE HEADQUARTERS
Berry Plastics Group, Inc.
101 Oakley Street
Evansville, Indiana 47710
812.424.2904
www.berryplastics.com
INVESTOR RELATIONS CONTACT
Dustin Stilwell
812.306.2964
ir@berryplastics.com
ANNUAL MEETING OF SHAREHOLDERS
Our annual meeting of shareholders will be held on February 24, 2016, at 10:00 a.m.
Central Time, at the Tropicana Executive Conference Center, 450 NW Riverside Dr.,
Evansville, Indiana 47708
REGISTRAR AND TRANSFER AGENT
Computershare
211 Quality Circle, Suite 210
College Station, TX 77845
(800) 962-4284
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
ADDITIONAL INFORMATION
You can access financial and other information about Berry Plastics Group, Inc.
at ir.berryplastics.com, including press releases, Forms 10-K, 10-Q, and 8-K as filed
with the Securities and Exchange Commission; and information on Corporate
Governance such as charters of Board Committees, our Code of Business Ethics and
Corporate Governance Guidelines. You can also request that any of these materials
be mailed to you at no charge by writing us at the address above.
Please visit our website berryplastics.com to view our 2015 Corporate
Sustainability Report, which will be available at the end of calendar Q1.
101 Oakley Street | Evansville, IN 47710 | 1.877.662.3779 | berryplastics.com
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