bpg10q020513.htm



SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 10-Q

 [X]     Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended December 29, 2012
or
 [   ]     Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
  
  
Commission File Number 001-35672
BERRY PLASTICS GROUP, INC.
(Exact name of registrant as specified in its charter)

   
Delaware
20-5234618
(State or other jurisdiction  
of incorporation or organization)
(IRS employer  
identification number)
101 Oakley Street  
Evansville, Indiana
  
47710
(Address of principal executive offices)
(Zip code)
  
Registrant’s telephone number, including area code:  (812) 424-2904  
  
Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class
Name of Each Exchange on Which Registered
Common Stock, $0.01 par value per share
New York Stock Exchange
 
Securities registered pursuant to Section 12(g) of the Act:  None   
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes [   ]  No [X]  
  
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934.  Yes [  ]  No [ X]  
  
Indicate by check mark whether the registrant:  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.  Yes [X ]  No [  ]  
  
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes [ X]  No [  ]  
  
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K:  [  ]  
  
Indicate by check mark whether the registrant is a large accelerated filer, accelerated filer, or non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):          
      Large accelerated filer [     ]           Accelerated filer  [     ]              Non-accelerated filer [   X  ] Small reporting company [    ] 
  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).             Yes[    ]   No[ X ]  

As of February 5, 2013, there were approximately 113,038,346 shares of the registrant’s common stock outstanding. 
 



  

 
 

 


 
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
 
This Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), with respect to our financial condition, results of operations and business and our expectations or beliefs concerning future events.  The forward-looking statements include, in particular, statements about our plans, strategies and prospects under the heading "Management’s Discussion and Analysis of Financial Condition and Results of Operations".  You can identify forward-looking statements because they contain words such as “believes,” “expects,” “may,” “will,” “should,” “would,” “could,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” or “anticipates” or similar expressions that relate to our strategy, plans or intentions.  All statements we make relating to our estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates and financial results or to our expectations regarding future industry trends are forward-looking statements.  In addition, we, through our senior management, from time to time make forward-looking public statements concerning our expected future operations and performance and other developments.  These forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those that we expected.  We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions.  While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results.  All forward-looking statements are based upon information available to us on the date of this Form 10-Q. 
 
Important factors that could cause actual results to differ materially from our expectations, which we refer to as cautionary statements, including, without limitation, in conjunction with the forward-looking statements included in this Form 10-Q.  All forward-looking information and subsequent written and oral forward-looking statements attributable to us, or to persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements.  Some of the factors that we believe could affect our results include: 
 
·  
risks associated with our substantial indebtedness and debt service; 
·  
changes in prices and availability of resin and other raw materials and our ability to pass on changes in raw material prices on a timely basis; 
·  
performance of our business and future operating results; 
·  
risks related to our acquisition strategy and integration of acquired businesses; 
·  
reliance on unpatented know-how and trade secrets; 
·  
increases in the cost of compliance with laws and regulations, including environmental, safety, and production and product laws and regulations; 
·  
risks related to disruptions in the overall economy and the financial markets may adversely impact our business; 
·  
catastrophic loss of one of our key manufacturing facilities, natural disasters, and other unplanned business interruptions; 
·  
risks of competition, including foreign competition, in our existing and future markets; 
·  
general business and economic conditions, particularly an economic downturn; 
·  
the ability of our insurance to cover fully our potential exposures; and
·  
the other factors discussed in our Form 10-K for the fiscal year ended September 29, 2012 in the section titled “Risk Factors.” 

We caution readers that the foregoing list of important factors may not contain all of the material factors that are important to you.  In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this Form 10-Q may not in fact occur.  Accordingly, investors should not place undue reliance on those statements.  We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. 
 
Readers should carefully review the factors discussed in our Form 10-K for the fiscal year ended September 29, 2012 in the section titled “Risk Factors” and other risk factors identified from time to time in our periodic filings with the Securities and Exchange Commission (“SEC”) and should not place undue reliance on our forward-looking statements.  We undertake no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.
 

 
-2-

 


 
AVAILABLE INFORMATION
 
We make available, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments, if any, to those reports through our Internet website as soon as practicable after they have been electronically filed with or furnished to the SEC.  Our internet address is www.berryplastics.com.  The information contained on our website is not being incorporated herein.
 
  
 

 
-3-

 
 
Berry Plastics Group, Inc.
Form 10-Q Index
For Quarterly Period Ended December 29, 2012  
 
 

     
Page No.
Part I.
Financial Information
 
       
 
Item 1.
Financial Statements:
 
   
Consolidated Balance Sheets
5
   
Consolidated Statements of Operations and Comprehensive Income (Loss)
6
   
Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
7
   
Consolidated Statements of Cash Flows
8
   
Notes to Consolidated Financial Statements
9
 
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
21
 
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
26
 
Item 4.
Controls and Procedures
27
       
Part II.
Other Information
 
       
 
Item 1.
Legal Proceedings
27
 
Item 1A.
Risk Factors
27
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
27
 
Item 3.
Defaults Upon Senior Securities
27
 
Item 4.
Mine Safety Disclosures
27
 
Item 5.
Other Information
27
 
Item 6.
Exhibits
27
 
Signature
 
28
 
 

 
-4-

 

 
Berry Plastics Group, Inc.
Consolidated Balance Sheets
 (in millions of dollars, except per share data)
 
   
December 29, 2012
   
September 29, 2012
 
Assets
 
(Unaudited)
       
Current assets:
           
Cash and cash equivalents
  $ 32     $ 87  
Accounts receivable (less allowance of $3 at December 29, 2012 and September 29, 2012)
    396       455  
Inventories
    551       535  
Deferred income taxes
    185       114  
Prepaid expenses and other current assets
    31       42  
Total current assets
    1,195       1,233  
Property, plant, and equipment, net
    1,223       1,216  
Goodwill, intangible assets and deferred costs
    2,620       2,636  
Other assets
    12       21  
Total assets
  $ 5,050     $ 5,106  
 
Liabilities and stockholders’ equity (deficit)
               
 
Current liabilities:
               
Accounts payable
  $ 285     $ 306  
Accrued expenses and other current liabilities
    385       300  
Current portion of long-term debt
    43       40  
Total current liabilities
    713       646  
Long-term debt, less current portion
    3,932       4,431  
Deferred income taxes
    381       315  
Other long-term liabilities
    337       166  
Total liabilities
    5,363       5,558  
Commitments and contingencies
               
Redeemable shares
          23  
Stockholders’ equity (deficit):
               
Common stock; ($0.01 par value;  400,000,000 shares authorized; 113,038,346 shares issued  and outstanding as of December 29, 2012; 84,696,218 issued and 83,209,232 outstanding as of September 29, 2012)
    1       1  
Paid-in capital
    300       131  
Notes receivable—common stock
    (2 )     (2 )
Non-controlling interest
    3       3  
Accumulated deficit
    (571 )     (561 )
Accumulated other comprehensive loss
    (44 )     (47 )
Total stockholders’ equity (deficit)
    (313 )     (475 )
Total liabilities and stockholders’ equity (deficit)
  $ 5,050     $ 5,106  

See notes to consolidated financial statements.

 
-5-

 


 
Berry Plastics Group, Inc.
Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
(in millions of dollars, except per share data)

   
Quarterly Period Ended
 
   
December 29, 2012
   
December 31, 2011
 
Net sales
  $ 1,072     $ 1,137  
Costs and expenses:
               
Cost of goods sold
    895       985  
Selling, general and administrative
    77       72  
Amortization of intangibles
    27       28  
Restructuring and impairment charges
    5       23  
Operating income
    68       29  
Debt extinguishment
    16        
Other income
    (3 )     (4 )
Interest expense
    70       83  
Loss before income taxes
    (15 )     (50 )
Income tax benefit
    (5 )     (19 )
Net loss
  $ (10 )   $ (31 )
 
Net loss per share:
               
Basic
    (0.09 )     (0.37 )
Diluted
    (0.09 )     (0.37 )
Weighted-average number of shares outstanding:
(in thousands)
               
Basic
    111,352       83,851  
Diluted
    111,352       83,851  
                 
                 
Comprehensive loss
  $ (7 )   $ (31 )

See notes to consolidated financial statements.

 
-6-

 


 
Berry Plastics Group, Inc.
Consolidated Statement of Changes in Stockholders’ Equity (Deficit)
For the Quarterly Period Ended December 29, 2012 and December 31, 2011
(Unaudited)
(in millions of dollars)

   
Common Stock
   
Paid-in Capital
   
Notes Receivable-Common Stock
   
Non-controlling Interest
   
Accumulated Other Comprehensive Loss
   
Accumulated Deficit
   
Total
 
Balance at October 1, 2011
  $     $ 143     $ (2 )   $ 3     $ (48 )   $ (563 )   $ (467 )
Stock compensation expense
          1                               1  
Derivative amortization
                            1             1  
Net loss
                                  (31 )     (31 )
Balance at December 31, 2011
          144       (2 )     3       (47 )     (594 )     (496 )
                                                         
Balance at September 29, 2012
  $ 1     $ 131     $ (2 )   $ 3     $ (47 )   $ (561 )   $ (475 )
Proceeds from issuance of common stock
          4                               4  
Stock compensation expense
          4                               4  
Termination of redeemable shares redemption requirement
          23                               23  
Proceeds from initial public offering
          438                               438  
Initial obligation under tax receivable agreement
          (300 )                             (300 )
Derivative amortization
                            1             1  
Net loss
                                  (10 )     (10 )
Currency translation
                            2             2  
Balance at December 29, 2012
  $ 1     $ 300     $ (2 )   $ 3     $ (44 )   $ (571 )   $ (313 )

See notes to consolidated financial statements.

 
-7-

 

Berry Plastics Group, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(in millions of dollars)

   
Quarterly Period Ended
 
   
December 29, 2012
   
December 31, 2011
 
Cash Flows from Operating Activities:
           
Net loss
  $ (10 )   $ (31 )
Adjustments to reconcile net loss to net cash provided by operating activities:
               
Depreciation
    60       61  
Amortization of intangibles
    27       28  
Non-cash interest expense
    5       5  
Deferred income tax expense (benefit)
    (5 )     (18 )
Loss on disposal and impairment of assets
          21  
Debt extinguishment
    16        
Other non-cash expense (income)
    5        
Changes in operating assets and liabilities:
               
Accounts receivable, net
    61       80  
Inventories
    (14 )     48  
Prepaid expenses and other assets
    12       (7 )
Accounts payable and other liabilities
    (70 )     (98 )
Net cash from operating activities
    87       89  
 
Cash Flows from Investing Activities:
               
Additions to property, plant and equipment
    (45 )     (45 )
Proceeds from sale of assets
    2       8  
Acquisition of businesses, net of cash acquired
    (20 )      
Net cash from investing activities
    (63 )     (37 )
 
Cash Flows from Financing Activities:
               
Proceeds from long-term borrowings
    1        
Repayments on long-term borrowings
    (522 )     (65 )
Proceeds from issuance of common stock
    4        
Proceeds from initial public offering
    438        
Net cash from financing activities
    (79 )     (65 )
Effect of exchange rate changes on cash
           
Net change in cash
    (55 )     (13 )
Cash and cash equivalents at beginning of period
    87       42  
Cash and cash equivalents at end of period
  $ 32     $ 29  

See notes to consolidated financial statements.

 
-8-

 

Berry Plastics Group, Inc.
Notes to Consolidated Financial Statements
(Unaudited)

1.  Background
 
Berry Plastics Group, Inc. (“Berry” or the “Company”) is a leading provider of value-added plastic consumer packaging and engineered materials with a track record of delivering high-quality customized solutions to our customers.  Representative examples of our products include thermoform drink cups, thin-wall containers, blow-molded bottles, specialty closures, prescription vials, specialty plastic films, adhesives and corrosion protection materials.  We sell our solutions predominantly into consumer-oriented end-markets, such as food and beverage, healthcare and personal care.   
 
2.  Basis of Presentation
 
Berry is majority owned by affiliates of Apollo Management, L.P. (“Apollo”) and Graham Partners (“Graham”).  Berry, through its wholly-owned subsidiaries operates in four primary segments:  Rigid Open Top, Rigid Closed Top, Engineered Materials, and Flexible Packaging.  The Company’s customers are located principally throughout the United States, without significant concentration in any one region or with any one customer.  The accompanying unaudited Consolidated Financial Statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) pursuant to the rules and regulations of the Securities and Exchange Commission for interim reporting.  Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.  Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full fiscal year.  For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Form 10-K filed with the Securities and Exchange Commission for the fiscal year end September 29, 2012.  All intercompany transactions have been eliminated.  The Company issued financial statements by filing with the Securities and Exchange Commission and has evaluated subsequent events up to the time of the filing.
 
Reclassification Adjustments
 
Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation.  The Company historically presented Other operating expenses in its Consolidated Statements of Operations, which consisted predominately of business optimization costs and management fees to affiliates of Apollo and Graham.  The Company has eliminated separate presentation of Other operating expenses from its Consolidated Statements of Operations to better align with the way the Company is reviewing its operating results.  For the quarterly periods ended December 29, 2012 and December 31, 2011 business optimization costs were $9 million and $13 million, respectively and are included in Cost of goods sold.  For the quarterly periods ended December 29, 2012 and December 31, 2011 management fees were $0 and $2 million, respectively, and are included in Selling, general and administrative expenses.
 
Initial Public Offering
 
In October 2012, the Company filed an initial public offering and sold 29,411,764 shares of common stock at $16.00 per share.  In conjunction with the initial public offering the Company executed a 12.25 for one stock split of the Company’s common stock.  The effect of the stock split on outstanding shares and earnings per share has been retroactively applied to all periods presented.  Transaction fees totaling $33 million were included in Paid-in capital on the Consolidated Balance Sheets.  Proceeds, net of transaction fees, of $438 million and cash from operations were used to repurchase $455 million of 11% Senior Subordinated Notes due September 2016.  As part of the repurchase the Company paid premiums of $13 million and wrote-off $3 million of deferred financing fees.
 
Tax Receivable Agreement
 
In connection with the initial public offering, the Company entered into an income tax receivable agreement ("TRA") that provides for the payment to pre-initial public offering stockholders, option holders and holders of our stock appreciation rights, 85% of the amount of cash savings, if any, in U.S. federal, foreign, state and local income tax that are actually realized (or are deemed to be realized in the case of a change of control) as a result of the utilization of our and our subsidiaries’ net operating losses attributable to periods prior to the initial public offering.  The Company expects to pay between $300 million and $350 million in cash related to this agreement.  This range is based on the Company's assumptions using various items, including valuation analysis and current tax law.  Upon the effective date of the TRA, the Company recorded an initial obligation of $300 million ($123 million in Accrued expenses and $177 million in Other long-term liabilities) which is recognized as a reduction of Paid-in capital on the Consolidated Balance Sheet as of December 29, 2012.  Changes in the recorded net deferred income tax assets will result in changes in the TRA obligation, and such changes will be recorded as Other expense (income) in the Consolidated Statement of Operations.  Payments under the TRA are not conditioned upon the parties' continued ownership of the Company.
 
 
-9-

 
 
Redeemable Common Stock 
 
As of September 29, 2012, the Company had entered into agreements with former employees that required the Company to redeem this common stock at pre-determined dates.  Historical redemption of this stock was based on the fair value of the stock on the fixed redemption date.  This redeemable common stock was recorded at its fair value in temporary equity and changes in the fair value were recorded in additional paid in capital each period.  Upon completion of the initial public offering, the redemption requirement terminated resulting in the Company reclassifying the shares into equity on the Consolidated Balance Sheets. 
 
Other Related Party Transactions
 
The Company recorded management fees of $2 million for the quarterly period ended December 31, 2011, charged by Apollo and other investors to the Company.  The Company’s management fee agreement with Apollo and other investors terminated upon completion of the initial public offering.
 
BP Parallel LLC, a non-guarantor subsidiary of the Company, invested $21 million to purchase assignments of $21 million of unsecured term loan during the quarter ended December 29, 2012.  Of the $21 million assignments purchased, $14 million were purchased from third parties affiliated with Apollo.
 
3.  Acquisitions
 
Stopaq®  
 
In June 2012, the Company acquired 100% of the shares of Frans Nooren Beheer B.V. and its operating companies (“Stopaq”) for a purchase price of $65 million ($62 million, net of cash acquired).  Stopaq is the inventor and manufacturer of patented visco-elastic technologies for use in corrosion prevention, sealing and insulation applications ranging from pipelines to subsea piles to rail and cable joints. The newly added business is operated in the Company’s Engineered Materials reporting segment.  To finance the purchase, the Company used cash on hand and existing credit facilities.  The Stopaq acquisition has been accounted for under the purchase method of accounting, and accordingly, the preliminary purchase price has been allocated to the identifiable assets and liabilities based on estimated fair values at the acquisition date.  The Company has not finalized the purchase price allocation to the fair value on fixed assets, deferred income taxes, intangibles and is reviewing all the working capital acquired.  The Company has recognized goodwill on this transaction as a result of expected synergies.  A portion of the goodwill will not be deductible for tax purposes.   
 
Prime Label
 
In October 2012, the Company acquired 100% of the shares of Prime Label and Screen Incorporated (“Prime Label”) for a purchase price of $20 million.  Prime is a leader in specialty re-sealable labels, including a patented rigid lens closure system. The newly added business is operated in the Company’s Flexible Packaging reporting segment.  To finance the purchase, the Company used cash on hand and existing credit facilities.  The Prime Label acquisition has been accounted for under the purchase method of accounting, and accordingly, the preliminary purchase price has been allocated to the identifiable assets and liabilities based on estimated fair values at the acquisition date.  The Company has not finalized the purchase price allocation to the fair value on fixed assets, deferred income taxes, intangibles and is reviewing all the working capital acquired.  The Company has recognized goodwill on this transaction as a result of expected synergies.  A portion of the goodwill will not be deductible for tax purposes.   
 
 
-10-

 
 
4.  Restructuring and Impairment Charges
 
The Company incurred restructuring costs related to severance, asset impairment and facility exit costs of $5 million and $23 million for the quarterly period ended December 29, 2012 and December 31, 2011, respectively.  The tables below set forth the significant components of the restructuring charges recognized for the quarterly period ended December 29, 2012 and December 31, 2011, by segment:
 
   
Quarterly Period Ended
 
   
December 29, 2012
   
December 31, 2011
 
Rigid Open Top
           
Severance and termination benefits
  $ 1     $  
Total
  $ 1     $  
Rigid Closed Top
               
Severance and termination benefits
  $ 1     $ 2  
Facility exit costs and other
    1        
Asset impairment
          3  
Total
  $ 2     $ 5  
Engineered Materials
               
Severance and termination benefits
  $ 1     $ 1  
Facility exit costs and other
          1  
Asset impairment
          16  
Total
  $ 1     $ 18  
Flexible Packaging
               
Severance and termination benefits
  $     $  
Facility exit costs and other
    1        
Asset impairment
           
Total
  $ 1     $  
Consolidated
               
Severance and termination benefits
  $ 3     $ 3  
Facility exit costs and other
    2       1  
Asset impairment
          19  
Total
  $ 5     $ 23  

 
The table below sets forth the activity with respect to the restructuring accrual at September 29, 2012 and December 29, 2012:
 
   
Severance and termination benefits
   
Facilities exit costs and other
   
Non-cash
   
Total
 
Balance at October 1, 2011
  $ 4     $ 3     $     $ 7  
Charges
    7       4       20       31  
Non-cash asset impairment
                (20 )     (20 )
Cash payments
    (7 )     (4 )           (11 )
Balance at September 29, 2012
    4       3             7  
Charges
    3       2             5  
Cash payments
    (2 )     (2 )           (4 )
Balance at December 29, 2012
  $ 5     $ 3     $     $ 8  

 
5.  Accrued Expenses, Other Current Liabilities and Other Long-Term Liabilities
 
The following table sets forth the totals included in Accrued expenses and other current liabilities on the Consolidated Balance Sheets.

 
 
-11-

 
 
 
   
December 29, 2012
   
September 29, 2012
 
Employee compensation, payroll and other taxes
  $ 61     $ 95  
Interest
    62       60  
Rebates
    78       68  
TRA obligation
    123        
Other
    61       77  
    $ 385     $ 300  

 
The following table sets forth the totals included in Other long-term liabilities on the Consolidated Balance Sheets.
 
   
December 29, 2012
   
September 29, 2012
 
Lease retirement obligation
  $ 21     $ 20  
Sale-lease back deferred gain
    33       34  
Pension liability
    82       84  
TRA obligation
    177        
Other
    24       28  
    $ 337     $ 166  

 
6.  Long-Term Debt
 
Long-term debt consists of the following:
 
 
Maturity Date
 
December 29, 2012
   
September 29, 2012
 
Term loan
April 2015
  $ 1,134     $ 1,134  
Revolving line of credit
June 2016
    44       73  
First Priority Senior Secured Floating Rate Notes
February 2015
    681       681  
8¼% First Priority Senior Secured Notes
November 2015
    370       370  
Second Priority Senior Secured Floating Rate Notes
September 2014
    210       210  
9½% Second Priority Senior Secured Notes
May 2018
    500       500  
9¾% Second Priority Senior Secured Notes
January 2021
    800       800  
Senior Unsecured Term Loan
June 2014
    18       39  
10¼% Senior Subordinated Notes
March 2016
    127       127  
11% Senior Subordinated Notes
September 2016
          455  
Debt discount, net
      (8 )     (9 )
Capital leases and other
Various
    99       91  
        3,975       4,471  
Less current portion of long-term debt
      (43 )     (40 )
      $ 3,932     $ 4,431  

 
In October 2012, the Company filed an initial public offering and sold 29,411,764 shares of common stock at $16.00 per share.  Proceeds, net of transaction fees, of $438 million and cash from operations were used to repurchase $455 million of 11% Senior Subordinated Notes.
 
In December 2012, BP Parallel LLC, invested $21 million to purchase assignments purchase assignments at then-prevailing market prices of $21 million of principal of the Senior Unsecured Term Loan.
 
7.  Financial Instruments and Fair Value Measurements
 
As part of the overall risk management, the Company uses derivative instruments to reduce exposure to changes in interest rates attributed to the Company’s floating-rate borrowings.  For those derivative instruments that are designated and qualify as hedging instruments, the Company must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign
 
 
-12-

 
 
operation.  To the extent hedging relationships are found to be effective, as determined by FASB guidance, changes in fair value of the derivatives are offset by changes in the fair value of the related hedged item are recorded to Accumulated other comprehensive loss.  Management believes hedge effectiveness is evaluated properly in preparation of the financial statements.
 
Cash Flow Hedging Strategy
 
For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative instrument is reported as a component of Accumulated other comprehensive loss and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings.
 
In November 2010, the Company entered into two separate interest rate swap transactions to manage cash flow variability associated with $1 billion of the outstanding variable rate term loan debt (the “2010 Swaps”).  The first agreement had a notional amount of $500 million and became effective in November 2010.  The agreement swaps three month variable LIBOR contracts for a fixed three year rate of 0.8925% and expires in November 2013.  The second agreement had a notional amount of $500 million and became effective in December 2010.  The agreement swaps three month variable LIBOR contracts for a fixed three year rate of 1.0235% and expires in November 2013.  In August 2011, the Company began utilizing 1-month LIBOR contracts for the underlying senior secured credit facility.  The Company’s change in interest rate selection caused the Company to lose hedge accounting on both of the interest rate swaps.  The Company recorded subsequent changes in fair value in the Consolidated Statement of Operations and will amortize the unrealized losses to Interest expense through the end of the respective swap agreements.
 
 
Liability Derivatives
 
Derivatives not designated as hedging
instruments under FASB guidance
Balance Sheet Location
 
December 29,
2012
   
September 29, 2012
 
Interest rate swaps — 2010 Swaps
Other long-term liabilities
  $ 6     $ 7  

 
The effect of the derivative instruments on the Consolidated Statement of Operations is as follows:
 
     
Quarterly Period Ended
 
Derivatives not designated as hedging
instruments under FASB guidance
Statement of Operations Location
 
December 29, 2012
   
December 31, 2011
 
 
Other expense (income)
  $ (1 )   $ (3 )
           Interest rate swaps — 2010 Swaps………….
Interest expense
  $ 1     $ 1  

 
The Fair Value Measurements and Disclosures section of the Accounting Standards Codification (“Codification” or “ASC”) defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, and establishes a framework for measuring fair value.  This section also establishes a three-level hierarchy (Level 1, 2 or 3) for fair value measurements based upon the observability of inputs to the valuation of an asset or liability as of the measurement date.  This section also requires the consideration of the counterparty’s or the Company’s nonperformance risk when assessing fair value.
 
The Company’s interest rate swap fair values were determined using Level 2 inputs as other significant observable inputs were not available.
 
The Company’s financial instruments consist primarily of cash and cash equivalents, long-term debt, interest rate swap agreements and capital lease obligations.  The fair value of the Company’s long-term debt was determined using Level 2 inputs, which include using quoted prices in inactive markets or significant other observable inputs for identical or comparable assets or liabilities.  The following table summarizes our long-term indebtedness for which the book value was in excess of the fair value:
 
 
-13-

 
 
   
December 29, 2012
   
September 29, 2012
 
First Priority Senior Secured Floating Rate Notes
  $ 3     $  
Second Priority Senior Secured Floating Rate Notes
    2       1  
Senior Unsecured Term Loan
          6  

 
Non-recurring Fair Value Measurements
 
The Company has certain assets that are measured at fair value on a non-recurring basis when impairment indicators are present.  The assets are adjusted to fair value only when the carrying values exceed the fair values.  The categorization of the framework used to price the assets is considered a Level 3, due to the subjective nature of the unobservable inputs used to determine the fair value.  These assets include primarily our definite lived and indefinite lived intangible assets, including Goodwill and our property plant and equipment.  The Company conducted our annual step one evaluation of goodwill and other intangibles as of the first date of the fourth quarter and preliminarily determined no impairment existed for any of our reporting units.  The Company has experienced volume declines in certain of our reporting units, however our cost reduction initiatives and profitability in these reporting units have been consistent with our estimated operating plan and previous cash flow estimates and we believe that our long term forecasts are still appropriate.  We have utilized a consistent methodology with prior years, which leverages a six year discounted cash flow analysis with a terminal year in combination with a comparable company market approach to determine the fair value of our reporting units.
 
Included in the following table are the major categories of assets measured at fair value on a non-recurring basis as of December 29, 2012 and December 31, 2011, along with the impairment loss recognized on the fair value measurement during the period:
 
   
As of December 29, 2012
 
   
Level 1
   
Level 2
   
Level 3
             
   
Quoted Prices in Active Markets for Identical Assets or Liabilities
   
Significant Other Observable Inputs
   
Significant Unobservable Inputs
   
Total
   
Quarter Ended
December 29, 2012 Impairment Loss
 
Indefinite-lived trademarks
  $     $     $ 220     $ 220     $  
Goodwill
                1,642       1,642        
Definite lived intangible assets
                758       758        
Property, plant, and equipment
                1,223       1,223        
Total
  $     $     $ 3,843     $ 3,843     $  


   
As of December 31, 2011
 
   
Level 1
   
Level 2
   
Level 3
             
   
Quoted Prices in Active Markets for Identical Assets or Liabilities
   
Significant Other Observable Inputs
   
Significant Unobservable Inputs
   
Total
   
Quarter Ended December 31, 2011 Impairment Loss
 
Indefinite-lived trademarks
  $     $     $ 220     $ 220     $  
Goodwill
                1,592       1,592        
Definite lived intangible assets
                843       843       17  
Property, plant, and equipment
                1,227       1,227       2  
Total
  $     $     $ 3,882     $ 3,882     $ 19  

 
Valuation of Property, Plant and Equipment and Definite Lived Intangible Assets
 
The Company periodically realigns their manufacturing operations which results in facilities being closed and shut down and equipment transferred to other facilities or equipment being scrapped.  The Company utilizes appraised values to corroborate the fair value of the facilities and has utilized a scrap value based on prior facility shut downs to estimate the fair value of the equipment, which has approximated the actual value that was received.  When impairment indicators exist, the Company will also perform an undiscounted cash flow analysis to determine the recoverability of the Company’s long lived assets.  The Company did not have any write-downs to their property, plant,
 
 
-14-

 
 
and or definite lived intangible assets for the quarterly period ended December 29, 2012.  The Company wrote-down their property, plant, and equipment with a carrying value of $1,229 million to its fair value of $1,227 million, which resulted in an impairment charge of $2 million for the quarterly period ended December 31, 2011.  The Company also wrote-down their definite lived intangible assets with a carrying value of $860 million to their fair value of $843 million, which resulted in an impairment charge of $17 million for the quarterly period ended December 31, 2011.
 
8.  Income Taxes
 
The effective tax rate from continuing operations was 32% and 38% for the quarterly periods ended December 29, 2012 and December 31, 2011, respectively.  A reconciliation of income tax benefit, computed at the federal statutory rate, to income tax benefit, as provided for in the financial statements, is as follows:
 
   
Quarterly Period Ended
 
   
December 29, 2012
   
December 31, 2011
 
Income tax benefit computed at statutory rate
  $ (5 )   $ (18 )
State income tax benefit, net of federal taxes
          (2 )
Change in valuation allowance
          1  
Other
           
Income tax benefit
  $ (5 )   $ (19 )

 
9.  Operating Segments
 
Berry’s operations are organized into four reportable segments: Rigid Open Top, Rigid Closed Top, Engineered Materials, and Flexible Packaging.  The Company has manufacturing and distribution centers in the United States, Canada, Mexico, Belgium, Australia, Germany, Brazil, Malaysia, and India.  The North American operation represents 96% of the Company’s net sales, 98% of total long-lived assets, and 99% of the total assets.  Selected information by reportable segment is presented in the following table: 
 
   
Quarterly Period Ended
 
   
December 29, 2012
   
December 31, 2011
 
Net sales:
           
Rigid Open Top
  $ 259     $ 287  
Rigid Closed Top
    313       347  
              Rigid Packaging
  $ 572     $ 634  
Engineered Materials
    325       328  
Flexible Packaging
    175       175  
Total net sales
  $ 1,072     $ 1,137  
Operating income (loss):
               
Rigid Open Top
  $ 27     $ 31  
Rigid Closed Top
    18       3  
              Rigid Packaging
  $ 45     $ 34  
Engineered Materials
    24       2  
Flexible Packaging
    (1 )     (7 )
Total operating income
  $ 68     $ 29  
Depreciation and amortization:
               
Rigid Open Top
  $ 23     $ 22  
Rigid Closed Top
    32       35  
              Rigid Packaging
  $ 55     $ 57  
Engineered Materials
    18       17  
Flexible Packaging
    14       15  
Total depreciation and amortization
  $ 87     $ 89  

 
 
-15-

 
 
 
   
December 29, 2012
   
September 29, 2012
 
Total assets:
           
Rigid Open Top
  $ 1,772     $ 1,773  
Rigid Closed Top
    1,931       1,959  
        Rigid Packaging   $ 3,703     $ 3,732  
Engineered Materials
    840       873  
Flexible Packaging
    507       501  
Total assets
  $ 5,050     $ 5,106  
Goodwill:
               
Rigid Open Top
  $ 681     $ 681  
Rigid Closed Top
    832       832  
              Rigid Packaging
  $ 1,513     $ 1,513  
Engineered Materials
    89       73  
Flexible Packaging
    40       40  
Total goodwill
  $ 1,642     $ 1,626  

 
10.  Guarantor and Non-Guarantor Financial Information  
 
Berry Plastics Corporation (“Issuer”) has notes outstanding which are fully, jointly, severally, and unconditionally guaranteed by substantially all of Berry’s domestic subsidiaries.  Separate narrative information or financial statements of the guarantor subsidiaries have not been included because they are 100% owned by the parent company and the guarantor subsidiaries unconditionally guarantee such debt on a joint and several basis.  A guarantee of a guarantor of the securities will terminate upon the following customary circumstances:  the sale of the capital stock of such guarantor if such sale complies with the indenture, the designation of such guarantor as an unrestricted subsidiary, the defeasance or discharge of the indenture, as a result of the holders of certain other indebtedness foreclosing on a pledge of the shares of a guarantor subsidiary or if such guarantor no longer guarantees certain other indebtedness of the issuer.  The guarantees are also limited as necessary to prevent them from constituting a fraudulent conveyance under applicable law and guarantees guaranteeing subordinated debt are subordinated to certain other of the Company’s debts.  Presented below is condensed consolidating financial information for the parent, issuer, guarantor subsidiaries and non-guarantor subsidiaries.  Our issuer and guarantor financial information includes all of our domestic operating subsidiaries, our non-guarantor subsidiaries include our foreign subsidiaries and BP Parallel, LLC.  BP Parallel, LLC is the entity that we established to buyback debt securities of Berry Plastics Group, Inc. and Berry Plastics Corporation.  Berry Plastics Group, Inc. uses the equity method to account for its ownership in Berry Plastics Corporation in the Condensed Consolidating Supplemental Financial Statements.  Berry Plastics Corporation uses the equity method to account for its ownership in the guarantor and non-guarantor subsidiaries.  All consolidating entries are included in the eliminations column along with the elimination of intercompany balances.
 

 
-16-

 


 
Condensed Supplemental Consolidated Statements of Operations
 
   
Quarterly Period End December 29, 2012
 
   
Parent
   
Issuer
   
Guarantor
Subsidiaries
   
Non-
Guarantor
Subsidiaries
   
Eliminations
   
Total
 
Net sales
  $     $ 133     $ 849     $ 90     $     $ 1,072  
Cost of sales
          137       694       64             895  
Selling, general and administrative expenses
          10       58       9             77  
Amortization of intangibles
          3       23       1             27  
Restructuring and impairment charges, net
                5                   5  
Operating income (loss)
          (17 )     69       16             68  
Debt extinguishment
          16       -                   16  
Other income
          (3 )     -                   (3 )
Interest expense, net
    11       9       55       (31 )     26       70  
Equity in net income of subsidiaries
    4       (62 )                 58        
Net income (loss) before income taxes
    (15 )     23       14       47       (84 )     (15 )
Income tax expense (benefit)
    (5 )     10       (1 )           (9 )     (5 )
Net income (loss)
  $ (10 )   $ 13     $ 15     $ 47     $ (75 )   $ (10 )
Comprehensive  income (loss)
  $ (10 )   $ 14     $ 15     $ 49     $ (75 )   $ (7 )

Consolidating Statement of Cash Flows
                                   
Cash Flow from Operating Activities
  $     $ (21 )   $ 95     $ 13     $     $ 87  
Cash Flow from Investing Activities
                                               
Additions to  property, plant, and equipment
          (2 )     (42 )     (1 )           (45 )
Proceeds from disposal of assets
                2                   2  
Investment in Parent
                      (21 )     21        
(Contributions) distributions to/from subsidiaries
    (442 )     421                   21        
Intercompany advances (repayments)
          46                   (46 )      
Investment in Issuer debt securities
                                   
Acquisition of business net of cash acquired
                (20 )                 (20 )
Net cash used in investing activities
    (442 )     465       (60 )     (22 )     (4 )     (63 )
                                                 
Cash Flow from Financing Activities
                                               
Proceeds from long—term debt
                      1             1  
Proceeds from issuance of common stock
    4                               4  
Proceeds from initial public stock offering
    438                               438  
Repayment of long—term debt
          (501 )                 (21 )     (522 )
Changes in intercompany balances
                (34 )     (12 )     46        
Contribution from Issuer
                      21       (21 )      
Net cash provided by (used in) financing activities
    442       (501 )     (34 )     10       4       (79 )
Net increase in cash and cash equivalents
          (57 )     1       1             (55 )
Cash and cash equivalents at beginning of period
          66             21             87  
Cash and cash equivalents at end of period
  $     $ 9     $ 1     $ 22     $     $ 32  

 
 
-17-

 

 
   
Quarterly Period End December 31, 2011
 
   
Parent
   
Issuer
   
Guarantor
Subsidiaries
   
Non—
Guarantor
Subsidiaries
   
Eliminations
   
Total
 
Net sales
  $     $ 145     $ 908     $ 84     $     $ 1,137  
Cost of sales
          149       776       60             985  
Selling, general and administrative expenses
          10       54       8             72  
Amortization of intangibles
          2       26                   28  
Restructuring and impairment charges, net
                23                   23  
Operating income (loss)
          (16 )     29       16             29  
Other income
          (4 )                       (4 )
Interest expense, net
    12       11       65       (24 )     19       83  
Equity in net income of subsidiaries
    38       (3 )                 (35 )      
Net income (loss) before income taxes
    (50 )     (20 )     (36 )     40       16       (50 )
Income tax expense (benefit)
    (19 )     (8 )           1       7       (19 )
Net income (loss)
  $ (31 )   $ (12 )   $ (36 )   $ 39     $ 9     $ (31 )
Comprehensive  income (loss)
  $ (31 )   $ (12 )   $ (36 )   $ 39     $ 9     $ (31 )

Consolidating Statement of Cash Flows
                                   
Cash Flow from Operating Activities
  $     $ (3 )   $ 83     $ 9     $     $ 89  
Cash Flow from Investing Activities
                                               
Additions to  property, plant, and equipment
          (4 )     (40 )     (1 )           (45 )
Proceeds from disposal of assets
                8                   8  
Investment in Parent
                      (4 )     4        
(Contributions) distributions to/from subsidiaries
          (4 )                 4        
Intercompany advances (repayments)
          63                   (63 )      
Investment in Issuer debt securities
                                   
Acquisition of business net of cash acquired
                                   
Net cash used in investing activities
          55       (32 )     (5 )     (55 )     (37 )
                                                 
Cash Flow from Financing Activities
                                               
Proceeds from long—term debt
                                   
Equity contributions
                                   
Repayment of long—term debt
          (61 )                 (4 )     (65 )
Changes in intercompany balances
                (55 )     (8 )     63        
Contribution from Issuer
                      4       (4 )      
Deferred financing costs
                                   
Net cash provided by (used in) financing activities
          (61 )     (55 )     (4 )     55       (65 )
Net increase in cash and cash equivalents
          (9 )     (4 )                 (13 )
Cash and cash equivalents at beginning of period
          20       5       17             42  
Cash and cash equivalents at end of period
  $     $ 11     $ 1     $ 17     $     $ 29  

 
 
-18-

 
 
 
Condensed Supplemental Consolidated Balance Sheet

   
December 29, 2012
 
   
Parent
   
Issuer
   
Guarantor
Subsidiaries
   
Non—
Guarantor
Subsidiaries
   
Eliminations
   
Total
 
Current assets
    185       158       725       137       (10 )     1,195  
Intercompany receivable
    241       3,749                   (3,990 )      
Property, plant and equipment, net
          109       1,037       77             1,223  
 Other noncurrent assets
    697       884       2,346       788       (2,083 )     2,632  
 Total assets
  $ 1,123     $ 4,900     $ 4,108     $ 1,002     $ (6,083 )   $ 5,050  
 
                                               
Current liabilities
    135       254       297       43       (16 )     713  
Intercompany payable
                3,869       121       (3,990 )      
Noncurrent liabilities
    1,301       4,103       118       188       (1,060 )     4,650  
Equity (deficit)
    (313 )     543       (176 )     650       (1,017 )     (313 )
Total liabilities and equity (deficit)
  $ 1,123     $ 4,900     $ 4,108     $ 1,002     $ (6,083 )   $ 5,050  
  
   
September 29, 2012
 
   
Parent
   
Issuer
   
Guarantor
Subsidiaries
   
Non—
Guarantor
Subsidiaries
   
Eliminations
   
Total
 
Current assets
    120       226       759       139       (11 )     1,233  
Intercompany receivable
    243       3,800       74             (4,117 )      
Property, plant and equipment, net
          113       1,023       80             1,216  
 Other noncurrent assets
    262       809       2,353       749       (1,516 )     2,657  
 Total assets
  $ 625     $ 4,948     $ 4,209     $ 968     $ (5,644 )   $ 5,106  
 
                                               
Current liabilities
    18       278       315       48       (13 )     646  
Intercompany payable
                3,966       151       (4,117 )      
Noncurrent liabilities
    1,059       4,579       119       8       (853 )     4,912  
Equity (deficit)
    (452 )     91       (191 )     761       (661 )     (452 )
Total liabilities and equity (deficit)
  $ 625     $ 4,948     $ 4,209     $ 968     $ (5,644 )   $ 5,106  

  
 
11.  Contingencies and Commitments
 
The Company is party to various legal proceedings involving routine claims which are incidental to the business.  Although the legal and financial liability with respect to such proceedings cannot be estimated with certainty, the Company believes that any ultimate liability would not be material to the business, financial condition, results of operations or cash flows of the Company.
 
12.  Basic and Diluted Net Income (Loss) per Share
 
Basic net income or loss per share is calculated by dividing the net income or loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration for common stock equivalents.  Diluted net income or loss per share is computed by dividing the net income or loss attributable to common stockholders by the weighted-average number of common share equivalents outstanding for the period determined using the treasury-stock method and the if-converted method.  For purposes of this calculation, stock options are considered to be common stock equivalents and are only included in the calculation of diluted net income or loss 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 or loss per share. 
 
 
-19-

 
 
The following tables and discussion provide a reconciliation of the numerator and denominator of the basic and diluted net loss per share computations.  The calculation below provides net income or loss on both basic and diluted basis for the quarterly period ended December 29, 2012 and December 31, 2011.
 
   
Quarterly Period Ended
 
   
December 29, 2012
   
December 31, 2011
 
             
Net loss
  $ (10 )   $ (31 )
                 
Weighted average shares of common stock outstanding--basic
    111,352       83,851  
                 
Weighted average shares of common stock outstanding
    111,352       83,851  
Other common stock equivalents
    -       -  
Weighted average shares of common stock outstanding--diluted
    111,352       83,851  
                 
Basic net loss per share
               
Basic net loss per share available to common shareholders
  $ (0.09 )   $ (0.37 )
                 
Diluted net loss per share
               
Diluted net loss per share available to common shareholders
  $ (0.09 )   $ (0.37 )

The conversion of stock options is not included in the calculation of diluted net loss per common share for the quarterly periods ended December 29, 2012 or December 21, 2011 as the effect of these conversions would be antidilutive to the net loss available to common shareholders.  Thus, the weighted average common equivalent shares used for purposes of computing diluted EPS are the same as those used to compute basic EPS for these periods.  Shares excluded from the calculation as the effect of their conversion into shares of our common stock would be antidilutive were 12,166,539 and 9,918,102 as of December 29, 2012 and December 31, 2011, respectively.
 

 
-20-

 

Item 2.
 
Management’s Discussion and Analysis of Financial Condition and
Results of Operations

 
Unless the context requires otherwise, references in this Management's Discussion and Analysis of Financial Condition and Results of Operations to the “Company” refer to Berry Plastics Group, Inc, and references to “we,” “our” or “us” refer to Berry Plastics Group, Inc. together with its consolidated subsidiaries, after giving effect to the transactions described in the next paragraph.  You should read the following discussion in conjunction with the consolidated financial statements of the Company 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 our Form 10-K for the fiscal year ended September 29, 2012 in the section titled “Risk Factors” and other risk factors identified from time to time in our periodic filings with the Securities and Exchange Commission.  Our actual results may differ materially from those contained in any forward-looking statements.  You should read the explanation of the qualifications and limitations on these forward-looking statements referenced within this report.
 
Acquisitions
 
We have a long history of acquiring and integrating companies.  We maintain an opportunistic acquisition strategy, which is focused on improving our long-term financial performance, enhancing our market positions and expanding our product lines or, in some cases, providing us with a new or complementary product line.  In our acquisitions, 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 within our unrealized synergies, which are in turn recognized in earnings after an acquisition has been fully integrated.  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 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.  In connection with our acquisitions, we have in the past and may in the future incur charges related to reductions and rationalizations. 
 
We also include the expected impact of our restructuring plans within our unrealized synergies which are in turn recognized in earnings after the restructuring plans are completed.  While the expected benefits on earnings is estimated at the commencement of each plan, due to the nature of the matters we are generally unable to accurately estimate or track what the ultimate effects have been due to movements of activities to multiple facilities. 
 
Stopaq®  
 
In June 2012, the Company acquired 100% of the shares of Frans Nooren Beheer B.V. and its operating companies (“Stopaq”) for a purchase price of $65 million ($62 million, net of cash acquired).  Stopaq is the inventor and manufacturer of patented visco-elastic technologies for use in corrosion prevention, sealing and insulation applications ranging from pipelines to subsea piles to rail and cable joints. The newly added business is operated in the Company’s Engineered Materials reporting segment.  To finance the purchase, the Company used cash on hand and existing credit facilities.  The Stopaq acquisition has been accounted for under the purchase method of accounting, and accordingly, the preliminary purchase price has been allocated to the identifiable assets and liabilities based on estimated fair values at the acquisition date.  The Company has not finalized the purchase price allocation to the fair value on fixed assets, deferred income taxes, intangibles and is reviewing all the working capital acquired.  The Company has recognized goodwill on this transaction as a result of expected synergies.  A portion of the goodwill will not be deductible for tax purposes.   
 
Prime Label
 
In October 2012, the Company acquired 100% of the shares of Prime Label and Screen Incorporated (“Prime Label”) for a purchase price of $20 million.  Prime is a leader in specialty re-sealable labels, including a patented rigid lens closure system. The newly added business is operated in the Company’s Flexible Packaging reporting segment.  To finance the purchase, the Company used cash on hand and existing credit facilities.  The Prime Label acquisition has been accounted for under the purchase method of accounting, and accordingly, the preliminary purchase price has been allocated to the identifiable assets and liabilities based on estimated fair values at the acquisition date.  The
 
 
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Company has not finalized the purchase price allocation to the fair value on fixed assets, deferred income taxes, intangibles and is reviewing all the working capital acquired.  The Company has recognized goodwill on this transaction as a result of expected synergies.  A portion of the goodwill will not be deductible for tax purposes.   
 
Recent Developments
 
Initial Public Offering
 
In October 2012, the Company completed an initial public offering and sold 29,411,764 shares of common stock at $16.00 per share.  In conjunction with the initial public offering the Company executed a 12.25 for one stock split of the Company’s common stock.  The effect of the stock split on outstanding shares and earnings per share has been retroactively applied to all periods presented.  Transaction fees totaling $33 million were included in Paid-in capital on the Consolidated Balance Sheets.  Proceeds, net of transaction fees, of $438 million and cash from operations were used to repurchase $455 million of 11% Senior Subordinated Notes due September 2016.  As part of the repurchase the Company paid premiums of $13 million and wrote-off $3 million of deferred financing fees.
 
Tax Receivable Agreement
 
In connection with the initial public offering, the Company entered into an income tax receivable agreement ("TRA") that provides for the payment to pre-initial public offering stockholders, option holders and holders of our stock appreciation rights, 85% of the amount of cash savings, if any, in U.S. federal, foreign, state and local income tax that are actually realized (or are deemed to be realized in the case of a change of control) as a result of the utilization of our and our subsidiaries’ net operating losses attributable to periods prior to the initial public offering.  The Company expects to pay between $300 million and $350 million in cash related to this agreement.  This range is based on the Company's assumptions using various items, including valuation analysis and current tax law.  Upon the effective date of the TRA, the Company recorded an initial obligation of $300 million ($123 million in Accrued expenses and $177 million in Other long-term liabilities) which is recognized as a reduction of Paid-in capital on the Consolidated Balance Sheet as of December 29, 2012.  Changes in the recorded net deferred income tax assets will result in changes in the TRA obligation, and such changes will be recorded as Other expense (income) in the Consolidated Statement of Operations.  Payments under the TRA are not conditioned upon the parties' continued ownership of the Company's equity.
 
Redeemable Common Stock 
 
As of September 29, 2012, the Company had entered into agreements with former employees that required the Company to redeem this common stock at pre-determined dates.  Historical redemption of this stock was based on the fair value of the stock on the fixed redemption date.  This redeemable common stock was recorded at its fair value in temporary equity and changes in the fair value were recorded in additional paid in capital each period.  Upon completion of the initial public offering, the redemption requirement terminated resulting in the Company reclassifying the shares into equity on the Consolidated Balance Sheet. 
 
BP Parallel Investments
 
In December 2012, BP Parallel LLC, a non-guarantor subsidiary of the Company, invested $21 million to purchase assignments of $21 million of our senior unsecured term loan during the quarter ended December 29, 2012.  The purchase did not result in a gain or loss.
 
Executive Summary
 
Business.  We operate 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, housewares, closures, overcaps, bottles, prescription containers, and tubes.  Our Engineered Materials segment sells specialty tapes, adhesives, pipeline corrosive protection solutions, polyethylene based film products, and waste bags.  The Flexible Packaging segment sells primarily high barrier, multilayer film products as well as printed bags and pouches. 
 
Raw Material Trends. Our primary raw material is plastic resin.  Polypropylene and polyethylene account for approximately 90% of our plastic resin purchases based on the 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:
 
 
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Polyethylene Butene Film
   
Polypropylene
 
   
2013
   
2012
   
2011
   
2013
   
2012
   
2011
 
1st quarter
  $ .69     $ .70     $ .68     $ .76     $ .79     $ .78  
2nd quarter
          .76       .72             .88       .95  
3rd quarter
          .72       .79             .85       1.08  
4th quarter
          .68       .73             .71       .98  

 
We expect plastic resin prices to trend upward early in the second fiscal quarter of 2013.  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 when plastic resin costs decrease.  Recently, the Company has made progress towards shortening these timing lags, but we still have a number of customers whose prices adjust quarterly or less frequently based on various index prices.  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 pass through raw material cost changes to our customers, improve manufacturing productivity and adapt to volume changes of our customers.  We seek to improve our overall profitability by implementing cost reduction programs for our manufacturing, selling and general and administrative expenses.  Looking forward to the second fiscal quarter of 2013, we believe overall economic activity will continue to remain sluggish, but modestly positive.  Despite the headwinds we will be facing and assuming volumes are in line with GDP forecasts of 2%, we anticipate profitability, as defined as adjusted EBITDA less pro forma adjustments, will improve versus the second fiscal quarter of 2012. 
 
Results of Operations
 
Comparison of the Quarterly Period Ended December 29, 2012 (the “Quarter”) and the Quarterly Period Ended December 31, 2011 (the “Prior Quarter”)
 
Net Sales.  Net sales decreased from $1,137 million in the Prior Quarter to $1,072 million in the Quarter.  This decrease is primarily attributed to lower selling prices of 6% as a result of lower plastic resin costs noted above.  The following discussion in this section provides a comparison of net sales by business segment.
 
 
Quarterly Period Ended
   
   
December 29, 2012
   
December 31, 2011
   
$ Change
   
% Change
 
Net sales:
                       
Rigid Open Top
  $ 259     $ 287     $ (28 )     (10 %)
Rigid Closed Top
    313       347       (34 )     (10 %)
                Rigid Packaging
  $ 572     $ 634     $ (62 )     (10 %)
Engineered Materials
    325       328       (3 )     (1 %)
Flexible Packaging
    175       175              
Total net sales
  $ 1,072     $ 1,137     $ (65 )     (6 %)

 
Net sales in the Rigid Open Top business decreased from $287 million in the Prior Quarter to $259 million in the Quarter as a result of net selling price decreases of 11% due to lower resin costs partially offset by volume growth of 1%.  Net sales in the Rigid Closed Top business decreased from $347 million in the Prior Quarter to $313 million in the Quarter as a result of net selling price decreases of 7% due to lower resin costs and a volume decline of 3%.  The volume decline is primarily attributed to general market softness.  The Engineered Materials business net sales decreased from $328 million in the Prior Quarter to $325 million in the Quarter as a result of net selling price decreases of 1% due to lower resin costs.  Net sales in the Flexible Packaging business was $175 million in the Prior Quarter and the Quarter as a result of volume growth of 2% offset by net selling price decreases of 2% due to lower resin costs.  The volume improvement is primarily due to a modest share gain in our sealant and barrier film. 
 
Operating Income.  Operating income increased from $29 million (3% of net sales) in Prior Quarter to $68 million (6% of net sales) in Quarter.  This increase is primarily attributed to $2 million from the relationship of net selling price to raw material costs, $2 million decrease in depreciation expense, $2 million decrease in amortization expense, $13 million decrease in business integration and impairment charges, $8 million of improved manufacturing efficiencies, $1
 
 
-23-

 
 
million from acquisitions and a non-cash impairment charge of $17 million in Prior Quarter partially offset by $1 million from volume declines described above, $7 million of increased selling, general and administrative expenses due to increased spending to accelerate future organic growth.  The operating loss from Prior Quarter divestiture includes a non-cash impairment charge of $17 million.  The following discussion in this section provides a comparison of operating income by business segment. 
 
   
Quarterly Period Ended
             
   
December 29, 2012
   
December 31, 2011
   
$ Change
   
% Change
 
Operating income (loss):
                       
Rigid Open Top
  $ 27     $ 31     $ (4 )     (13 %)
Rigid Closed Top
    18       3       15       500 %
                Rigid Packaging
  $ 45     $ 34     $ 11       32 %
Engineered Materials
    24       2       22       1,100 %
Flexible Packaging
    (1 )     (7 )     6       86 %
Total operating income
  $ 68     $ 29     $ 39       134 %

Operating income for the Rigid Open Top business decreased from $31 million (11% of net sales) in Prior Quarter to $27 million (10% of net sales) in Quarter.  This decrease is primarily attributed to a $4 million decline in the relationship of net selling price to raw material costs and $2 million increase of selling, general and administrative expenses partially offset by an improvement in manufacturing efficiencies of $2 million.  Operating income for the Rigid Closed Top business increased from $3 million (1% of net sales) in Prior Quarter to $18 million (6% of net sales) in Quarter.  This increase is primarily attributed to a $11 million decline in business integration expenses, $3 million improvement in the relationship of net selling price to raw material costs, $3 million reduction of depreciation and amortization expense, $1 million of improved operating performance in manufacturing partially offset by $2 million increase in selling, general and administrative expenses and $1 million from volume declines described above.  Operating income for the Engineered Materials business improved from $2 million (1% of net sales) in Prior Quarter to $24 million (7% of net sales)
Quarter.  This increase is primarily attributed to a $17 million non-cash impairment in Prior Quarter, $1 million from acquisitions, $4 million improvement in the relationship of net selling price to raw material costs, $4 million of improved operating performance in manufacturing partially offset by $4 million increase in business integration $1 million increase in selling, general and administrative expenses.  Operating loss for the Flexible Packaging business improved from a loss of $7 million (-4% of net sales) in Prior Quarter to a loss of $1 million (-1% of net sales) in Quarter.  This improvement is primarily attributed to a $5 million reduction of business integration expense, $1 million reduction of depreciation and amortization expense, and a $2 million improvement in manufacturing efficiencies partially offset by $1 million decline in the relationship of net selling price to raw material costs and $1 million increase of selling, general and administrative expenses.
 
Debt Extinguishment. Debt extinguishment was $16 million during the Quarter.  These were related to loss on extinguishment of debt attributed to $3 million of write-off of deferred fees and $13 million of premiums paid related to the debt extinguishment of the Company’s 11% Senior Subordinated Notes during the Quarter.
 
Other Income. Other income decreased from $4 million in the Prior Quarter to $3 million in the Quarter.  The change is primarily related to the change in the fair value of derivative instruments.
 
 Interest Expense.  Interest expense decreased from $83 million in the Prior Quarter to $70 million in the Quarter primarily as the result of the debt extinguishment of the Company’s 11% Senior Subordinated Notes.
 
Income Tax Benefit.  For the Quarter, we recorded an income tax benefit of $5 million or an effective tax rate of 33% compared to an income tax benefit of $19 million or an effective tax rate of 38% in the Prior Quarter.  The effective tax rate for the Quarter is impacted by the relative impact of discrete items.
 
Net Loss.  Net loss improved from $31 million in the Prior Quarter to $10 million in the Quarter for the reasons discussed above.
 
Liquidity and Capital Resources
 
Senior Secured Credit Facility
 
The Company’s senior secured credit facilities consist of $1,200 million term loan and $650 million asset based revolving line of credit (“Credit Facility”).  The term loan matures in April 2015 and the revolving line of credit matures in June 2016, subject to certain conditions.  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 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 December 29, 2012, the Company had $44 million outstanding on the revolving
 
 
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credit facility, $48 million outstanding letters of credit and a $145 million borrowing base reserve providing unused borrowing capacity of $413 million under the revolving line of credit.  The Company was in compliance with all covenants as of December 29, 2012.
 
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.  At December 29, 2012, the Company had unused borrowing capacity of $413 million under the revolving credit facility and thus was not subject to the minimum fixed charge coverage ratio covenant.  Our fixed charge ratio was 1.7 to 1.0 at December 29, 2012.
 
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 December 29, 2012.
 
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 our Adjusted EBITDA for the four quarters and quarterly period ended December 29, 2012 to net income (loss):
 
   
December 29, 2012
 
   
Four Quarters Ended
   
Quarterly Period Ended
 
Adjusted EBITDA
  $ 812     $ 176  
Net interest expense
    (315 )     (70 )
Depreciation and amortization
    (353 )     (87 )
Income tax benefit (expense)
    (16 )     5  
Business optimization and other expense
    (39 )     (6 )
Restructuring and impairment
    (13 )     (5 )
Extinguishment of debt
    (16 )     (16 )
Non-cash stock compensation expense
    (5 )     (4 )
        Pro forma acquisitions
    (6 )     -  
Unrealized cost savings
    (26 )     (3 )
        Net income (loss)
  $ 23     $ (10 )

     Cash flow from operating activities
  $ 477     $ 87  
     Net additions to property, plant, and equipment
    (206 )     (43 )
     Adjusted free cash flow
  $ 271     $ 44  
     Cash flow from investing activities
    (281 )     (63 )
     Cash flow from financing activities
    (193 )     (79 )

 
While the determination of appropriate adjustments in the calculation of Adjusted EBITDA is subject to interpretation under the terms of the Credit Facility, management believes the adjustments described above are in accordance with the covenants in the Credit Facility.  Adjusted EBITDA should not be considered in isolation or construed as an alternative to our net income (loss) or other measures as determined in accordance with GAAP.  In addition, other companies in our industry or across different industries may calculate bank covenants and related definitions differently than we do, limiting the usefulness of our calculation of Adjusted EBITDA as a comparative measure. 
 
Tax Receivable Agreement
 
The Company expects to pay between $300 million and $350 million in related to the TRA over the next five years with $123 million projected to be paid during the next twelve months.  The payment range is based on the Company's assumptions using various items, including valuation analysis and current tax law.  Payments under the TRA are not conditioned upon the parties' continued ownership of the Company.
 
 
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Cash Flows
 
Net cash provided by operating activities decreased from $89 million in the Prior Quarter to $87 million in the Quarter.  The change is primarily attributed to additional working capital partially offset by improved operating performance.
 
Net cash used in investing activities increased from $37 million in the Prior Quarter to $63 million in the Quarter primarily as a result of acquisition of Prime.  Our capital expenditures are forecasted at $230 million for fiscal 2013 and will be funded from cash flows from operating activities and existing liquidity.
 
Net cash used in financing activities was $65 million in the Prior Quarter compared to $79 million in the Quarter.  The Quarter change is primarily attributed to proceeds we raised in our initial public offering, which we utilized to repurchase the 11% Senior Subordinated Notes.  In the Prior Quarter, we made $65 million of payments against our outstanding debt obligation.
 
 Based on our current level of operations, we believe that cash flow from operations and available cash, together with available borrowings under our senior secured credit facilities, will be adequate to meet our short-term liquidity needs over the next twelve months.  We base such belief on historical experience and the funds available under the revolving credit facility.  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 of our Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended September 29, 2012.  In particular, increases in the cost of resin which we are unable to pass through to our customers on a timely basis or significant acquisitions could severely impact our liquidity.
 
Item 3.              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, senior secured first priority notes and second priority senior secured notes.  Our senior secured credit facilities are comprised of (i) a $1,200 million term loan and (ii) a $650 million revolving credit facility.  At December 29, 2012, the Company had $44 million outstanding on the revolving credit facility.  The net outstanding balance of the term loan was $1,134 million at December 29, 2012.  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 mean the greater of (i) in the case of our term loan, 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.  Our $681 of senior secured first priority notes accrue interest at a rate per annum, reset quarterly, equal to LIBOR plus 4.75%. Our second priority senior secured floating rate notes of $210 million bear interest at a rate of LIBOR plus 3.875% per annum, which resets quarterly.
 
At December 29, 2012, the LIBOR rate of 0.36% was applicable to the term loan, first priority senior secured floating rate notes and second priority senior secured floating rate notes.  If the LIBOR rate increases 0.25% and 0.50%, we estimate an annual increase in our interest expense of $3 million and $6 million, respectively.
 
In November 2010, the Company entered into two separate interest rate swap transactions to protect $1 billion of the outstanding variable rate term loan debt from future interest rate volatility.  The first agreement had a notional amount of $500 and became effective in November 2010.  The agreement swaps three month variable LIBOR contracts for a fixed three year rate of 0.8925% and expires in November 2013.  The second agreement had a notional amount of $500 and became effective in December 2010.  The agreement swaps three month variable LIBOR contracts for a fixed three year rate of 1.0235% and expires in November 2013.  The counterparties to these agreements are with global financial institutions.  In August 2011, the Company began utilizing 1-month LIBOR contracts for the underlying senior secured credit facility.  The Company’s change in interest rate selection caused the Company to lose hedge accounting on both of the interest rate swaps.  The Company recorded subsequent changes in fair value in the Consolidated Statement of Operations and will amortize the unrealized losses to Interest expense through the end of the respective swap agreements.  A .25% change in LIBOR would not have a material impact on the fair value of the interest rate swaps.
 
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.  The resin market is a global market and, based on our experience, we believe
 
 
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that adequate quantities of plastic resins will be available at market prices, but 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 cost of goods sold.
 
Item 4.              Controls and Procedures
 
(a)           Evaluation of disclosure controls and procedures.
 
Under applicable SEC regulations, management of a reporting company, with the participation of the principal executive officer and principal financial officer, must periodically evaluate the company’s “disclosure controls and procedures,” which are defined generally as controls and other procedures of a reporting company designed to ensure that information required to be disclosed by the reporting company in its periodic reports filed with the commission (such as this Form 10-Q) is recorded, processed, summarized, and reported on a timely basis.
 

The Company's management, with the participation of the Chief Executive Officer and the Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the disclosure controls and procedures as of December 29, 2012.  Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 29, 2012, the design and operation of our disclosure controls and procedures were effective at the reasonable assurance level.
 
 (b)           Changes in internal controls.
 
There were no changes in our internal control over financial reporting that occurred during the quarter ended December 29, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
Part II.  Other Information
 
Item 1.                Legal Proceedings
 
There has been no material changes in legal proceedings from the items disclosed in our Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended September 29, 2012.
 
Item 1A.            Risk Factors
 
You should carefully consider the risks described in our Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended October 1, 2011, including those under the heading “Risk Factors” and other information contained in this Quarterly Report before investing in our securities. Realization of any of these risks could have a material adverse effect on our business, financial condition, cash flows and results of operations.  There were no material changes in the Company’s risk factors since described in our Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended October 1, 2011.
 
Item 2.               Unregistered Sales of Equity Securities and Use of Proceeds
 
Not Applicable
 
Item 3.               Defaults Upon Senior Securities
 
Not Applicable
 
Item 4.               Mine Safety Disclosures
 
Not Applicable
 
Item 5.               Other Information
 
Not Applicable
 
Item 6.               Exhibits
 
31.1           Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer
31.2           Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer
32.1           Section 1350 Certification of the Chief Executive Officer
32.2           Section 1350 Certification of the Chief Financial Officer

 
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SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 

 
Berry Plastics Group, Inc.
 
February 5, 2013
 
 
    By: /s/ James M. Kratochvil                                                               
 
           James M. Kratochvil
         Chief Financial Officer (Principal Financial and Accounting Officer)



 
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ex311.htm
EXHIBIT 31.1
CHIEF EXECUTIVE OFFICER CERTIFICATION

I, Jonathan D. Rich, Chairman and Chief Executive Officer of Berry Plastics Group, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Berry Plastics Group, Inc. (the “Registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

 
 

 

6. 
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.





Date:           February 5, 2013                                                                   /s/ Jonathan D. Rich        
    Jonathan D. Rich
    Chairman and Chief Executive Officer

 
 

 

ex312.htm
EXHIBIT 31.2
CHIEF FINANCIAL OFFICER CERTIFICATION

I, James M. Kratochvil, Chief Financial Officer of Berry Plastics Group, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Berry Plastics Group, Inc. (the “Registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

 
 

 

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(a) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.



Date:  February 5, 2013                                                                             /s/ James M. Kratochvil           
     James M. Kratochvil
     Chief Financial Officer (Principal Financial and Accounting Officer)



 
 

 

ex321.htm

                                                                                                                     EXHIBIT 32.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Berry Plastics Group, Inc. (the “Registrant”) on Form 10-Q for the quarter ended December 29, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jonathan D. Rich, Chairman and Chief Executive Officer of the Registrant, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.



/s/ Jonathan D. Rich          
Jonathan D. Rich
Chairman and Chief Executive Officer

Date:           February 5, 2013

ex322.htm
EXHIBIT 32.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Berry Plastics Group, Inc. (the “Registrant”) on Form 10-Q for the quarter ended December 29, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James M. Kratochvil, the Executive Vice-President, Chief Financial Officer, Secretary and Assistant Treasurer of the Registrant, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.


/s/ James M. Kratochvil         
James M. Kratochvil
Chief Financial Officer (Principal Financial and Accounting Officer)


Date:           February 5, 2013