UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
FORM 10-Q
 
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the quarterly period ended July 2, 2016
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 
Commission File Number 001-35672
BERRY PLASTICS GROUP, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
 
20-5234618
(State or other jurisdiction  
of incorporation or organization)
 
(IRS employer  
identification number)
101 Oakley Street  
Evansville, Indiana
 
  
47710
(Address of principal executive offices)
 
(Zip code)
  
Registrant's telephone number, including area code: (812) 424-2904  
 
Securities registered pursuant to Section 12(b) of the Act:
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.  Yes   No   
  
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes No    
  
Indicate by check mark whether the registrant is a large accelerated filer, accelerated filer, or non-accelerated filer.  See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):   
 
    Large accelerated filer           Accelerated filer          Non-accelerated filer   Small reporting company   
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).  
Yes     No  
 
Class
 
Outstanding at August 9, 2016
Common Stock, $.01 par value per share
 
121.6 million shares
 
1

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

2

Berry Plastics Group, Inc.
Form 10-Q Index
For Quarterly Period Ended July 2, 2016
 
Part I.
Financial Information
Page No.
 
Item 1.
Financial Statements:
 
 
 
 
 
 
 
 
 
 
Item 2.
 
Item 3.
 
Item 4.
Part II.
Other Information
 
 
Item 1.
 
Item 1A.
 
Item 6.
 
 
3

Part I. Financial Information
 
Item 1. Financial Statements
 
Berry Plastics Group, Inc.
Consolidated Statements of Income (Loss)
(Unaudited)
(in millions of dollars, except per share amounts)
 
 
 
Quarterly Period Ended
   
Three Quarterly Periods Ended
 
 
 
July 2, 2016
   
June 27, 2015
   
July 2, 2016
   
June 27, 2015
 
Net sales 
 
$
1,645
   
$
1,241
   
$
4,871
   
$
3,685
 
Costs and expenses:
                               
Cost of goods sold 
   
1,296
     
1,003
     
3,885
     
3,037
 
Selling, general and administrative 
   
129
     
92
     
421
     
266
 
Amortization of intangibles 
   
35
     
22
     
106
     
70
 
Restructuring and impairment charges
   
6
     
3
     
29
     
11
 
Operating income 
   
179
     
121
     
430
     
301
 
Debt extinguishment
   
4
     
94
     
4
     
94
 
Other (income) expense, net 
   
(18
)
   
2
     
(21
)
   
2
 
Interest expense, net 
   
73
     
47
     
222
     
152
 
Income before income taxes 
   
120
     
(22
)
   
225
     
53
 
Income tax (benefit) expense 
   
24
     
(9
)
   
66
     
15
 
Consolidated net income (loss) 
 
$
96
   
$
(13
)
 
$
159
   
$
38
 
 
                               
Net income (loss) per share:
                               
Basic 
 
$
0.79
   
$
(0.11
)
 
$
1.32
   
$
0.32
 
Diluted 
   
0.76
     
(0.11
)
   
1.28
     
0.31
 
Outstanding weighted-average shares:
                               
Basic 
   
121.1
     
119.5
     
120.5
     
118.9
 
Diluted 
   
125.9
     
119.5
     
123.9
     
123.7
 
 

Berry Plastics Group, Inc.
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
(in millions of dollars) 
 
 
 
Quarterly Period Ended
   
Three Quarterly Periods Ended
 
 
 
July 2, 2016
   
June 27, 2015
   
July 2, 2016
   
June 27, 2015
 
Consolidated net income (loss) 
 
$
96
   
$
(13
)
 
$
159
   
$
38
 
Currency translation 
   
(16
)
   
2
     
39
     
(32
)
Interest rate hedges 
   
(4
)
   
2
     
(20
)
   
(18
)
Provision for income taxes related to other comprehensive income items
   
1
     
     
8
     
6
 
Comprehensive income (loss)
 
$
77
   
$
(9
)
 
$
186
   
$
(6
)
 
See notes to consolidated financial statements.

4

Berry Plastics Group, Inc.
Consolidated Balance Sheets
(in millions of dollars)
 
 
 
July 2, 2016
   
September 26, 2015
 
Assets
 
(Unaudited)
       
             
Current assets:
           
Cash and cash equivalents 
 
$
236
   
$
228
 
Accounts receivable (less allowance of $10 and 3, respectively)
   
725
     
434
 
Inventories:
               
Finished goods 
   
428
     
309
 
Raw materials and supplies 
   
280
     
213
 
 
   
708
     
522
 
Deferred income taxes 
   
     
162
 
Prepaid expenses and other current assets 
   
97
     
37
 
Total current assets 
   
1,766
     
1,383
 
Property, plant, and equipment, net 
   
2,276
     
1,294
 
Goodwill, intangible assets and deferred costs, net 
   
3,735
     
2,349
 
Other assets 
   
28
     
2
 
Total assets 
 
$
7,805
   
$
5,028
 
                 
Liabilities
               
                 
Current liabilities:
               
Accounts payable 
 
$
554
   
$
330
 
Accrued expenses and other current liabilities 
   
466
     
338
 
Current portion of long-term debt 
   
66
     
37
 
Total current liabilities 
   
1,086
     
705
 
Long-term debt, less current portion 
   
5,812
     
3,648
 
Deferred income taxes 
   
365
     
387
 
Other long-term liabilities 
   
375
     
341
 
Total liabilities 
   
7,638
     
5,081
 
                 
Redeemable non-controlling interest 
   
12
     
12
 
 
               
Stockholders' equity (deficit)
               
 
               
Common stock (121.5 and 119.9 shares issued, respectively)
   
1
     
1
 
Additional paid-in capital 
   
440
     
406
 
Non-controlling interest 
   
3
     
3
 
Accumulated deficit 
   
(197
)
   
(356
)
Accumulated other comprehensive loss 
   
(92
)
   
(119
)
Total stockholders' equity (deficit) 
   
155
     
(65
)
Total liabilities and stockholders' equity (deficit) 
 
$
7,805
   
$
5,028
 
 
See notes to consolidated financial statements.

5

Berry Plastics Group, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(in millions of dollars)
 
 
 
Three Quarterly Periods Ended
 
 
 
July 2, 2016
   
June 27, 2015
 
Cash Flows from Operating Activities:
           
Consolidated net income
 
$
159
   
$
38
 
Adjustments to reconcile net cash provided by operating activities:
               
Depreciation 
   
284
     
193
 
Amortization of intangibles 
   
106
     
70
 
Non-cash interest expense 
   
8
     
5
 
Deferred income tax 
   
23
     
12
 
Debt extinguishment
   
4
     
94
 
Stock compensation expense 
   
17
     
17
 
Other non-cash operating activities, net 
   
(12
)
   
5
 
Changes in working capital 
   
(26
)
   
(38
)
Changes in other assets and liabilities 
   
4
     
(4
)
Net cash from operating activities 
   
567
     
392
 
                 
Cash Flows from Investing Activities:
               
Additions to property, plant and equipment 
   
(228
)
   
(124
)
Proceeds from sale of assets 
   
4
     
18
 
Acquisition of business, net of cash acquired 
   
(2,283
)
   
 
Other investing activities, net
   
(11
)
   
 
Net cash from investing activities 
   
(2,518
)
   
(106
)
                 
Cash Flows from Financing Activities:
               
Proceeds from long-term borrowings 
   
2,490
     
702
 
Repayments on long-term borrowings 
   
(390
)
   
(940
)
Proceeds from issuance of common stock 
   
20
     
16
 
Payment of tax receivable agreement 
   
(57
)
   
(39
)
Debt financing costs 
   
(38
)
   
(87
)
Purchase of non-controlling interest 
   
(66
)
   
 
Net cash from financing activities 
   
1,959
     
(348
)
Effect of exchange rate changes on cash 
   
     
(5
)
Net change in cash 
   
8
     
(67
)
Cash and cash equivalents at beginning of period 
   
228
     
129
 
Cash and cash equivalents at end of period 
 
$
236
   
$
62
 
 
See notes to consolidated financial statements.

6

Berry Plastics Group, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
(tables in millions of dollars, except per share data)
 
1.  Basis of Presentation
 
The accompanying unaudited Condensed Consolidated Financial Statements of Berry Plastics Group, Inc. ("the Company" or "Berry") have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") pursuant to the rules and regulations of the Securities and Exchange Commission for interim reporting. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In preparing financial statements in conformity with GAAP, we must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures at the date of the financial statements and during the reporting period. Actual results could differ from those estimates. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included, and all subsequent events up to the time of the filing have been evaluated. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's most recent Form 10-K filed with the Securities and Exchange Commission.
 
In November 2015, the Company reorganized into three operating segments: Health, Hygiene & Specialties, Consumer Packaging, and Engineered Materials.  The Company has recast all prior period amounts to conform to this new reporting structure.
 
2. Recently Issued Accounting Pronouncements
 
Changes to GAAP are established by the Financial Accounting Standards Board ("FASB") in the form of accounting standards updates to the FASB's Accounting Standards Codification.  During fiscal 2016, with the exception of the below, there have been no developments to the recently adopted accounting pronouncements from those disclosed in the Company's 2015 Annual Report on Form 10-K that are considered to have a material impact on our unaudited consolidated financial statements.
 
Inventory
 
In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory to simplify the guidance on the subsequent measurement of inventory, excluding inventory measured using last-in, first out or the retail inventory method. Under the new standard, inventory should be at the lower of cost and net realizable value. The new accounting guidance is effective for interim and annual periods beginning after December 15, 2016 with early adoption permitted. The Company elected to early adopt this guidance, effective at the beginning of fiscal 2016. Its effect did not have a material impact on our financial statements.
 
Business Combinations
 
In September 2015, the FASB issued ASU 2015-16, Business Combinations (Topic 805), Simplifying the Accounting for Measurement-Period Adjustments which requires that the cumulative impact of a measurement period adjustment (including the impact on prior periods) be recognized in the reporting period in which the adjustment is identified.  Entities should present separately on the face of the income statement or disclose in the footnotes the portion of the measurement period adjustment recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment had been recognized as of the acquisition date.  The new guidance is effective for interim and annual periods beginning after December 15, 2015 with early adoption permitted. The Company elected to early adopt this guidance, effective at the beginning of fiscal 2016. We will continue to consider the impact of such guidance on our recording of the AVINTIV, Inc. business combination.
 
Income Taxes
 
In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes which simplifies the presentation of deferred income taxes.  This update requires that deferred tax assets and liabilities be classified as non-current in a statement of financial position.  The update is effective for financial periods beginning after December 15, 2017; however, early application is permitted.  The Company adopted this guidance effective at the beginning of fiscal 2016, on a prospective basis, resulting in a $175 million reclassification of our net current deferred tax asset to the net long-term deferred tax liabilities on our Consolidated Balance Sheet.

7

Leases
 
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements.  Under the new standard, the lessee of an operating lease will be required to do the following: 1) recognize a right-of-use asset and a lease liability in the statement of financial position, 2) recognize a single lease cost allocated over the lease term generally on a straight-line basis, and 3) classify all cash payments within operating activities on the statement of cash flows.  Companies will be required to adopt this standard on a modified retrospective approach, and amendments in this guidance are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.  Early application is permitted.  The Company is currently evaluating the impact of this guidance.
 
Stock Compensation
 
In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, as part of its Simplification Initiative. The new guidance will require all income tax effects of awards to be recognized in the income statement when the awards vest or are settled. It also will allow an employer to repurchase more of an employee's shares than it can today for tax withholding purposes without triggering liability accounting and to make a policy election for forfeitures as they occur. The guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The Company is currently evaluating the impact of this guidance.
 
3. Acquisition
 
AVINTIV Inc.
 
In October 2015, the Company acquired 100% of the capital stock of AVINTIV Inc. ("Avintiv") for a purchase price of $2.26 billion, net of $195 million of cash acquired, which is preliminary and subject to adjustment. Avintiv is one of the world's leading developers, producers, and marketers of nonwoven specialty materials used in hygiene, infection prevention, personal care, and industrial, construction and filtration applications. The acquired business is operated in the Health, Hygiene & Specialties reporting segment. To finance the purchase, the Company issued $400 million aggregate principal amount of 6.0% second priority senior secured notes due 2022 and entered into an incremental assumption agreement to increase the commitments under the Company's existing term loan credit agreement by $2.1 billion due 2022.
The acquisition has been accounted for under the purchase method of accounting, and accordingly, the purchase price has been allocated to the identifiable assets and liabilities based on preliminary fair values at the acquisition date.  The results of Avintiv have been included in the consolidated results of the Company since the date of the acquisition.  During the quarterly period ending July 2, 2016, the Company recorded adjustments based on an updated fair value analysis to the preliminary purchase price allocation of $10 million, $21 million and negative $27 million to intangible assets, goodwill and property and equipment, respectively.  The Company has not finalized the allocation of the purchase price to the fair value of fixed assets, intangibles, or deferred income taxes and is continuing to review all of the working capital acquired and uncertain tax positions. The Company has recognized Goodwill on this transaction primarily as a result of expected synergies of Avintiv, and does not expect Goodwill to be deductible for tax purposes.  The following table summarizes the current preliminary allocation of purchase price and the estimated fair values of the assets acquired and liabilities assumed at the date of the acquisition:
Working capital (a)
 
$
167
 
Property and equipment
   
977
 
Intangible assets
   
596
 
Goodwill
   
831
 
Historical Avintiv debt assumed
   
(53
)
Non-controlling interest
   
(63
)
Deferred purchase price
   
(30
)
Other assets and long-term liabilities
   
(165
)
       
(a) Includes an $11 million step up of inventory to fair value
 
 
The deferred purchase price relates to certain tax claims of Companhia Providência Indústria e Comércio ("Providência") at the time Providência was acquired by Avintiv.  If the claims are resolved in the Company's favor, the deferred purchase price will be paid to the legacy Providência shareholders.  However, if the Company or Providência incur actual tax liability in respect to these claims, the amount of deferred purchase price will be reduced by the amount of such actual tax liability.  The Company will be responsible for any actual tax liability in excess of the deferred purchase price and the cash consideration deposited into escrow.

Unaudited pro forma net sales were $1.7 billion and $5.1 billion for the quarterly period and three quarterly periods ended June 27, 2015, respectively. Unaudited pro forma net losses were $22 million and $30 million for the quarterly period and three quarterly periods ended June 27, 2015, respectively. The unaudited pro forma net sales and net losses assume that the Avintiv acquisition had occurred as of the beginning of the period.
 
8

The unaudited pro forma information presented above is for informational purposes only and is not necessarily indicative of the operating results that would have occurred had the Avintiv acquisition been consummated at the beginning of the period, nor is it necessarily indicative of future operating results.  Further, the information reflects only pro forma adjustments for additional interest expense, depreciation, and amortization, net of the applicable income tax effects.
 
4.  Accounts Receivable Factoring Agreements
 
A number of the Company's foreign subsidiaries have entered into factoring agreements to sell certain receivables to unrelated third-party financial institutions. The Company accounts for these transactions in accordance with ASC 860, "Transfers and Servicing" ("ASC 860"). ASC 860 allows for the ownership transfer of accounts receivable to qualify for sale treatment when the appropriate criteria is met, which permits the Company to present the balances sold under the program to be excluded from Accounts receivable, net on the Consolidated Balance Sheets. Receivables are considered sold when (i) they are transferred beyond the reach of the Company and its creditors, (ii) the purchaser has the right to pledge or exchange the receivables, and (iii) the Company has surrendered control over the transferred receivables.  In addition, the Company provides no other forms of continued financial support to the purchaser of the receivables once the receivables are sold. The table below summarizes the total amount of accounts receivable on the Consolidated Balance Sheets, sold under these factoring arrangements as of the end of the third fiscal quarter:
 
 
 
July 2, 2016
   
September 26, 2015
 
Trade receivables sold to financial institutions
 
$
25
   
$
 
Net amounts advanced from financial institutions
   
(21
)
   
 
Amounts due from financial institutions
 
$
4
   
$
 
 
In addition to the programs described above, the Company has a U.S. based program where certain U.S. based receivables are sold to unrelated third-party financial institutions. There were no amounts outstanding from the financial institutions related to U.S. based programs at July 2, 2016.  The fees associated with transfer of receivables for all programs were not material for any of the periods presented.
 
5.  Restructuring and Impairment Charges
 
The Company incurred restructuring costs related to severance, asset impairment, and facility exit costs.  The tables below set forth the significant components of the restructuring charges recognized, by segment:
 
 
 
 
Quarterly Period Ended
   
Three Quarterly Periods Ended
 
   
July 2, 2016
   
June 27, 2015
   
July 2, 2016
   
June 27, 2015
 
Consumer Packaging 
 
$
2
   
$
2
   
$
7
   
$
10
 
Health, Hygiene & Specialties 
   
4
     
     
20
     
 
Engineered Materials 
   
     
1
     
2
     
1
 
Consolidated 
 
$
6
   
$
3
   
$
29
   
$
11
 
 
The table below sets forth the activity with respect to the restructuring accrual at July 2, 2016:
 
 
 
Severance and
termination benefits
   
Facilities exit
costs and other
   
Non-cash charges
   
Total
 
Balance at September 26, 2015
 
$
2
   
$
8
   
$
   
$
10
 
Charges 
   
22
     
5
     
2
     
29
 
Non-cash asset impairment 
   
     
     
(2
)
   
(2
)
Cash payments 
   
(14
)
   
(6
)
   
     
(20
)
Balance at July 2, 2016
 
$
10
   
$
7
   
$
   
$
17
 
 
9

 
6. Accrued Expenses, Other Current Liabilities and Other Long-Term Liabilities
 
The following table sets forth the totals included in Accrued expenses and other current liabilities on the Consolidated Balance Sheets:
 
 
 
July 2, 2016
   
September 26, 2015
 
Employee compensation, payroll and other
 
$
136
   
$
95
 
Interest 
   
41
     
38
 
Rebates 
   
53
     
53
 
Restructuring 
   
17
     
10
 
Accrued taxes 
   
53
     
20
 
Tax receivable agreement obligation
   
76
     
57
 
Accrued operating expenses 
   
90
     
65
 
 
 
$
466
   
$
338
 
 
The following table sets forth the totals included in Other long-term liabilities on the Consolidated Balance Sheets:
 
 
 
July 2, 2016
   
September 26, 2015
 
Lease retirement obligation 
 
$
34
   
$
32
 
Sale-lease back deferred gain
   
26
     
28
 
Pension liability 
   
76
     
57
 
Deferred purchase price 
   
40
     
 
Tax receivable agreement obligation
   
99
     
175
 
Interest rate swaps 
   
56
     
36
 
Other 
   
44
     
13
 
 
 
$
375
   
$
341
 
 
The Company made $57 million of payments related to the income tax receivable agreement ("TRA") in the January 2, 2016 quarter, of which Apollo Global Management, LLC received $46 million. The TRA provides for an annual payment to TRA holders at 85% of the amount of cash savings, if any, in U.S. federal, foreign, state and local income tax that are actually realized as a result of the utilization of our net operating losses attributable to periods prior to the initial public offering.

10

7.  Long-Term Debt
 
Long-term debt consists of the following:
 
 
 
Maturity Date
   
July 2, 2016
   
September 26, 2015
 
Term loan 
 
February 2020
   
$
1,355
   
$
1,369
 
Term loan 
 
January 2021
     
814
     
 
Term loan 
 
October 2022
     
1,995
     
 
Modified term loan
   
     
     
1,019
 
Revolving line of credit 
 
May 2020
     
     
 
51/8% Second Priority Senior Secured Notes
 
July 2023
     
700
     
700
 
51/2% Second Priority Senior Secured Notes
 
May 2022
     
500
     
500
 
6% Second Priority Senior Secured Notes
 
October 2022
     
400
     
 
Debt discounts and deferred fees 
           
(61
)
   
(29
)
Capital leases and other 
 
Various
     
175
     
126
 
Total long-term debt 
           
5,878
     
3,685
 
Current portion of long-term debt 
           
(66
)
   
(37
)
Long-term debt, less current portion
         
$
5,812
   
$
3,648
 
 
The Company's senior secured credit facilities consist of $4.2 billion of term loans and a $650 million asset based revolving line of credit. The Company was in compliance with all covenants as of July 2, 2016.
 
During fiscal 2016, the Company has made $390 million of repayments on long-term borrowings using existing liquidity.
 
Term Loans
 
In October 2015, the Company entered into an incremental assumption agreement to increase the commitments under the existing term loan credit agreement by $2.1 billion.  The incremental assumption agreement provided for that incremental term loan to bear interest at LIBOR plus 3.00% per annum with a LIBOR floor of 1.00% to mature in October 2022 and to be subject to customary amortization. The proceeds from the incremental term loan, in addition to the 6% Second Priority Senior Secured Notes, were used to finance the Avintiv acquisition.  The Company recognized $11 million of debt discount and $25 million of deferred financing fees related to this assumption agreement.

In June 2016, the Company entered into an incremental assumption agreement and amendment to lower the interest rates under certain of the existing term loans.  The term loan maturing in January 2021 now bears interest at LIBOR plus 2.50% per annum with a LIBOR floor of 1.00%.  The term loan maturing in October 2022 now bears interest at LIBOR plus 2.75% per annum with a LIBOR floor of 1.00%. Additionally, if the Company is able to achieve a first lien secured leverage ratio below 3.0 to 1.0, the interest rate on the term loan maturing in October 2022 will be reduced to LIBOR plus 2.50%. All other terms remain unchanged.  The term loans are considered to be a loan syndication and as a result, a portion of the existing term loans were modified and a portion were considered to be extinguished.  The Company recorded $4 million to loss on debt extinguishment, reflecting the write-off of deferred financing fees and debt discounts, net of amortization associated with the portion of the debt that was considered extinguished.  The Company also recognized $2 million of debt discount related to the assumption agreement executed in June 2016.

Debt discounts and deferred financing fees are presented net of Long-term debt, less the current portion on the Consolidated Balance Sheet and are amortized to Interest expense through maturity.
 
6% Second Priority Senior Secured Notes

In October 2015, the Company issued $400 million of 6% second priority senior secured notes due October 2022.  Interest on these notes is due semi-annually in April and October.  The proceeds from these notes, in addition to the incremental term loan, were used to finance the Avintiv acquisition. The Company recognized $5 million of deferred financing fees related to this debt issuance that will be amortized to Interest expense through maturity.
 
8. Financial Instruments and Fair Value Measurements
 
In the normal course of business, the Company is exposed to certain risks arising from business operations and economic factors. The Company may use derivative financial instruments to help manage market risk and reduce the exposure to fluctuations in interest rates and foreign currencies. These financial instruments are not used for trading or other speculative purposes.  For those derivative instruments that are designated and qualify as hedging instruments, the Company must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation.  To the extent hedging relationships are found to be effective, as determined by FASB guidance, changes in the fair value of the derivatives are offset by changes in the fair value of the related hedged item and recorded to Accumulated other comprehensive loss.  Management believes hedge effectiveness is evaluated properly in preparation of the financial statements.
 
11

Foreign Currency Forward Contracts Not Designated as Hedges
 
The primary purposes of our foreign currency hedging activities is to manage the potential changes in value associated with the changes in foreign currencies on anticipated future foreign cash movements for certain jurisdictions.  The changes in fair value of these derivative contracts are recognized in other income, net, on our consolidated statements of operations and are largely offset by the remeasurement of the underlying intercompany loan.  These contracts are typically entered into and settled within the given reporting period.

Cash Flow Hedging Strategy
 
For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative instrument is reported as a component of Accumulated other comprehensive loss and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings. The categorization of the framework used to price these derivative instruments is considered a Level 3, due to the subjective nature of the unobservable inputs used to determine the fair value.
 
In February 2013, the Company entered into an interest rate swap transaction to manage cash flow variability associated with $1 billion of outstanding variable rate term loan debt. The agreement swapped the greater of a three-month variable LIBOR contract or 1.00% for a fixed three-year rate of 2.355%, with an effective date in May 2016 and expiration in May 2019. In June 2013, the Company elected to settle this derivative instrument and received $16 million as a result of this settlement. The offset is included in Accumulated other comprehensive income (loss) and is being amortized to Interest expense from May 2016 through May 2019, the original term of the swap agreement.
 
In March 2014, the Company entered into an interest rate swap transaction to manage cash flow variability associated with $1 billion of outstanding variable rate term loan debt. The agreement swaps the greater of a three-month variable LIBOR contract or 1.00% for a fixed three-year rate of 2.59%, with an effective date in February 2016 and expiration in February 2019.
 
In September 2015, the Company entered into an interest rate swap transaction to manage cash flow variability associated with $1 billion of outstanding variable rate term loan debt from future interest rate volatility. The agreement swaps the greater of a three-month variable LIBOR contract or 1.00% for a fixed annual rate of 1.7185 %, with an effective date in December 2015 and expiration in June 2019.
 
The Company records the changes in fair value of derivative instruments designated for hedge accounting as prescribed in ASC 815 – Derivatives and Hedging, in Accumulated other comprehensive income (loss) and Deferred income taxes. All other changes in derivative instruments not designated as hedging instruments flow through the Consolidated Statement of Operations.
 
Balance Sheet Location
July 2, 2016
 
September 26, 2015
 
Derivative instruments
Other long-term liabilities
 
$
56
   
$
36
 
 
The effect of the Company's derivative instruments on the Consolidated Statement of Operations is as follows:
 
 
   
Quarterly Period Ended
 
Three Quarterly Periods Ended
 
Derivatives instruments
Statement of Operations Location
July 2, 2016
 
June 27, 2015
 
July 2, 2016
 
June 27, 2015
 
Interest rate swaps 
Interest expense, net
 
$
6
   
$
   
$
10
   
$
 
Foreign currency swaps 
Other (income) expense
 
$
3
   
$
   
$
9
   
$
 
 
Non-recurring Fair Value Measurements
 
The Company has certain assets that are measured at fair value on a non-recurring basis when impairment indicators are present. The assets are adjusted to fair value only when the carrying values exceed the fair values. The categorization of the framework used to price the assets is considered Level 3, due to the subjective nature of the unobservable inputs used to determine the fair value. These assets include primarily our definite lived and indefinite lived intangible assets, including Goodwill and our property, plant, and equipment. The Company reviews Goodwill and other indefinite lived assets for impairment as of the first day of the fourth fiscal quarter each year, and more frequently if impairment indicators exist. The Company determined Goodwill and other indefinite lived assets were not impaired in our annual fiscal 2015 assessment. As a result of the segment reorganization that occurred during the January 2, 2016 quarter, the Company conducted the qualitative assessment and determined it was more likely than not that the fair value of each reporting unit exceeded the carrying amount as of the measurement date. No impairment indicators were identified in the current quarter.

12

Included in the following table are the major categories of assets measured at fair value on a non-recurring basis as of July 2, 2016 and September 26, 2015, along with the impairment loss recognized on the fair value measurement during the period:
 
 
 
As of July 2, 2016
 
 
 
Level 1
   
Level 2
   
Level 3
   
Total
   
Impairment
 
Indefinite-lived trademarks
 
$
   
$
   
$
248
   
$
248
   
$
 
Goodwill 
   
     
     
2,541
     
2,541
     
 
Definite lived intangible assets
   
     
     
942
     
942
     
 
Property, plant, and equipment
   
     
     
2,276
     
2,276
     
2
 
Total 
 
$
   
$
   
$
6,007
   
$
6,007
   
$
2
 
 
 
 
As of September 26, 2015
 
 
 
Level 1
   
Level 2
   
Level 3
   
Total
   
Impairment
 
Indefinite-lived trademarks
 
$
   
$
   
$
207
   
$
207
   
$
 
Goodwill 
   
     
     
1,652
     
1,652
     
 
Definite lived intangible assets
   
     
     
486
     
486
     
 
Property, plant, and equipment
   
     
     
1,294
     
1,294
     
2
 
Total 
 
$
   
$
   
$
3,639
   
$
3,639
   
$
2
 
 
The Company's financial instruments consist primarily of cash and cash equivalents and long-term debt.  The fair value of our marketable long-term indebtedness exceeded book value by $75 million as of July 2, 2016.  The Company's long-term debt fair values were determined using Level 2 inputs as other significant observable inputs were not available.  
 
9.  Income Taxes
 
The Company's effective tax rate was 20% and 41% for the quarterly period ended July 2, 2016 and June 27, 2015, respectively, and 29% and 28 % for the three quarterly periods ended July 2, 2016 and June 27, 2015, respectively.  Within the quarter the effective tax rate was favorably impacted by one-time U.S. permanent items. In addition to these items, our year-to-date effective tax rate was lower than our statutory rate due to favorable foreign rate differentials and the U.S. research and development credit, partially offset by state taxes and foreign income taxed in the U.S.

10.  Operating Segments
 
In November 2015 the Company reorganized into three operating segments: Consumer Packaging, Health, Hygiene & Specialties, and Engineered Materials.  The new structure is designed to better align us with our customers, provide improved service, drive future growth, and to facilitate future cost saving synergies.  Selected information by reportable segment is presented in the following tables, with prior period amounts recast to conform to the new structure:

13


   
Quarterly Period Ended
   
Three Quarterly Periods Ended
 
 
 
July 2, 2016
   
June 27, 2015
   
July 2, 2016
   
June 27, 2015
 
Net sales:
                       
Consumer Packaging 
 
$
705
   
$
731
   
$
2,075
   
$
2,163
 
Health, Hygiene & Specialties 
   
567
     
122
     
1,699
     
383
 
Engineered Materials 
   
373
     
388
     
1,097
     
1,139
 
Total net sales 
 
$
1,645
   
$
1,241
   
$
4,871
   
$
3,685
 
Operating income:
                               
Consumer Packaging 
 
$
63
   
$
75
   
$
173
   
$
168
 
Health, Hygiene & Specialties 
   
61
     
7
     
119
     
24
 
Engineered Materials 
   
55
     
39
     
138
     
109
 
Total operating income
 
$
179
   
$
121
   
$
430
   
$
301
 
Depreciation and amortization:
                               
Consumer Packaging 
 
$
65
   
$
59
   
$
195
   
$
177
 
Health, Hygiene & Specialties 
   
36
     
8
     
140
     
26
 
Engineered Materials 
   
19
     
20
     
55
     
60
 
 Total depreciation and amortization
 
$
120
   
$
87
   
$
390
   
$
263
 

 
 
July 2, 2016
   
September 26, 2015
 
Total assets:
           
Consumer Packaging 
 
$
3,617
   
$
3,832
 
Health, Hygiene & Specialties 
   
3,471
     
385
 
Engineered Materials 
   
717
     
811
 
Total assets 
 
$
7,805
   
$
5,028
 
Goodwill:
               
Consumer Packaging 
 
$
1,521
   
$
1,520
 
Health, Hygiene & Specialties 
   
937
     
48
 
Engineered Materials 
   
83
     
84
 
Total goodwill 
 
$
2,541
   
$
1,652
 
 
Selected information by geography is presented in the following tables:
 
 
Quarterly Period Ended
 
Three Quarterly Periods Ended
 
 
July 2, 2016
 
June 27, 2015
 
July 2, 2016
 
June 27, 2015
 
Net sales:
               
North America
 
$
1,329
   
$
1,193
   
$
3,939
   
$
3,540
 
South America
   
88
     
2
     
246
     
5
 
Europe
   
158
     
30
     
481
     
91
 
Asia
   
70
     
16
     
205
     
49
 
Total net sales
 
$
1,645
   
$
1,241
   
$
4,871
   
$
3,685
 
 
 
 
July 2, 2016
   
September 26, 2015
 
Long-lived assets:
           
North America 
 
$
4,706
   
$
3,510
 
South America 
   
570
     
5
 
Europe 
   
488
     
79
 
Asia 
   
275
     
51
 
Total Long-lived assets
 
$
6,039
   
$
3,645
 

14

Goodwill  
 
In connection with the change in reporting segments, the Company allocated the goodwill to the new segments under the provisions of ASC 350.  The changes in the carrying amount of goodwill by reportable segment due to the current year realignment are as follows:  
 
 
 
Rigid Open
Top
   
Rigid Closed
Top
   
Engineered
Materials
   
Flexible
Packaging
   
Consumer
Packaging
   
Health,
Hygiene &
Specialties
   
Total
 
Balance as of September 26, 2015
 
$
681
   
$
823
   
$
69
   
$
79
   
$
   
$
   
$
1,652
 
Segment reorganization
   
(681
)
   
(823
)
   
15
     
(79
)
   
1,520
     
48
     
 
Acquisitions, net
   
     
     
     
     
     
846
     
846
 
Foreign currency translation adjustment
   
     
     
(1
)
   
     
1
     
43
     
43
 
Balance as of July 2, 2016
 
$
   
$
   
$
83
   
$
   
$
1,521
   
$
937
   
$
2,541
 
 
11.  Contingencies and Commitments
 
The Company is party to various legal proceedings in addition to the above involving routine claims which are incidental to its business. Although the Company's legal and financial liability with respect to such proceedings cannot be estimated with certainty, management believes that any ultimate liability would not be material to its financial statements.
 
The Company has various purchase commitments for raw materials, supplies, and property and equipment incidental to the ordinary conduct of business.
 
12.  Basic and Diluted Net Income per Share
 
Basic net income per share is calculated by dividing the net income attributable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration for common stock equivalents. Diluted net income per share is computed by dividing the net income attributable to common stockholders by the weighted-average number of common share equivalents outstanding for the period determined using the treasury-stock method and the if-converted method. For purposes of this calculation, stock options are considered to be common stock equivalents and are only included in the calculation of diluted net income per share when their effect is dilutive.
 
The following tables and discussion provide a reconciliation of the numerator and denominator of the basic and diluted net income per share computations.
 
 
 
Quarterly Period Ended
   
Three Quarterly Periods Ended
 
(in millions, except per share amounts)
 
July 2, 2016
   
June 27, 2015
   
July 2, 2016
   
June 27, 2015
 
Numerator
                       
Consolidated net income (loss)
 
$
96
   
$
(13
)
 
$
159
   
$
38
 
Denominator
                               
Weighted average common shares outstanding - basic
   
121.1
     
119.5
     
120.5
     
118.9
 
Dilutive shares
   
4.8
     
-
     
3.4
     
4.8
 
Weighted average common and common equivalent shares outstanding - diluted
   
125.9
     
119.5
     
123.9
     
123.7
 
                                 
Per common share income (loss)
                               
Basic
 
$
0.79
   
$
(0.11
)
 
$
1.32
   
$
0.32
 
Diluted
 
$
0.76
   
$
(0.11
)
 
$
1.28
   
$
0.31
 
 
15

13.  Accumulated Other Comprehensive Income (Loss)
 
The components and activity of Accumulated other comprehensive income (loss) are as follows: 
 
(Amounts presented net of taxes)
 
Currency
Translation
   
Defined
Benefit
Pension and
Retiree Health
Benefit Plans
   
Interest Rate
Hedges
   
Accumulated
Other
Comprehensive
Income (Loss)
 
Balance at September 26, 2015 
 
$
(81
)
 
$
(25
)
 
$
(13
)
 
$
(119
)
Other comprehensive income (loss) before reclassifications 
   
39
     
     
(30
)
   
9
 
Net amount reclassified from accumulated other comprehensive income (loss)  
   
     
     
10
     
10
 
Provision for income taxes related to other comprehensive income items
   
     
     
8
     
8
 
Balance at July 2, 2016
 
$
(42
)
 
$
(25
)
 
$
(25
)
 
$
(92
)
 
(Amounts presented net of taxes)
 
Currency
Translation
   
Defined
Benefit
Pension and
Retiree Health
Benefit Plans
   
Interest Rate
Hedges
   
Accumulated
Other
Comprehensive
Income (Loss)
 
Balance at September 27, 2014
 
$
(36
)
 
$
(15
)
 
$
8
   
$
(43
)
Other comprehensive income (loss) before reclassifications
   
(32
)
   
     
(18
)
   
(50
)
Net amount reclassified from accumulated other comprehensive income (loss)
   
     
     
     
 
Provision for income taxes related to other comprehensive income items
   
     
     
6
     
6
 
Balance at June 27, 2015 
 
$
(68
)
 
$
(15
)
 
$
(4
)
 
$
(87
)
 
14. Purchase of Non-controlling Interest
 
At the time of our acquisition, Avintiv owned a 71.25% controlling interest in Providência, their Brazilian subsidiary.  In the January 2, 2016 quarter, the Company acquired the remaining 28.75% non-controlling ownership interest of Providência for $66 million.  As a result of this transaction, Providência became a wholly-owned subsidiary and the Company recorded $3 million to Additional paid-in capital.

15.  Guarantor and Non-Guarantor Financial Information 
 
Berry Plastics Corporation ("Issuer") has notes outstanding which are fully, jointly, severally, and unconditionally guaranteed by its parent, Berry Plastics Group, Inc. (for purposes of this Note 15, "Parent") and substantially all of Issuer's domestic subsidiaries.  Separate narrative information or financial statements of the guarantor subsidiaries have not been included because they are 100% owned by Parent and the guarantor subsidiaries unconditionally guarantee such debt on a joint and several basis.  A guarantee of a guarantor subsidiary 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 indentures, 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 of the guarantor subsidiaries 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.  Parent also guarantees the Issuer's term loans and revolving credit facilities.  The guarantor subsidiaries guarantee our term loans and are co-borrowers under our revolving credit facility.  Presented below is condensed consolidating financial information for the Parent, Issuer, guarantor subsidiaries and non-guarantor subsidiaries.  The Issuer and guarantor financial information includes all of our domestic operating subsidiaries; our non-guarantor subsidiaries include our foreign subsidiaries and the unrestricted subsidiaries under the Issuer's indentures.  The Parent uses the equity method to account for its ownership in the Issuer in the Condensed Consolidating Supplemental Financial Statements.  The Issuer 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 Balance Sheet

 
 
July 2, 2016
 
 
 
Parent
   
Issuer
   
Guarantor
Subsidiaries
   
Non—
Guarantor
Subsidiaries
   
Eliminations
   
Total
 
Current assets
   
     
97
     
1,055
     
614
     
     
1,766
 
Intercompany receivable
   
436
     
2,935
     
     
46
     
(3,417
)
   
 
Property, plant, and equipment, net
   
     
78
     
1,474
     
724
     
     
2,276
 
Other assets
   
272
     
4,099
     
4,102
     
750
     
(5,460
)
   
3,763
 
Total assets
 
$
708
   
$
7,209
   
$
6,631
   
$
2,134
   
$
(8,877
)
 
$
7,805
 
 
                                               
Current liabilities
   
76
     
209
     
495
     
306
     
     
1,086
 
Intercompany payable
   
     
45
     
3,372
     
     
(3,417
)
   
 
Other long-term liabilities
   
465
     
5,925
     
102
     
60
     
     
6,552
 
Redeemable non-controlling interest
   
12
     
     
     
12
     
(12
)
   
12
 
Stockholders' equity (deficit)
   
155
     
1,030
     
2,662
     
1,756
     
(5,448
)
   
155
 
Total liabilities and stockholders' equity (deficit)
 
$
708
   
$
7,209
   
$
6,631
   
$
2,134
   
$
(8,877
)
 
$
7,805
 

 
 
September 26, 2015
 
 
 
Parent
   
Issuer
   
Guarantor
Subsidiaries
   
Non—
Guarantor
Subsidiaries
   
Eliminations
   
Total
 
Current assets
   
162
     
257
     
767
     
197
     
     
1,383
 
Intercompany receivable
   
329
     
2,963
     
     
83
     
(3,375
)
   
 
Property, plant and equipment, net
   
     
79
     
1,111
     
104
     
     
1,294
 
 Other assets
   
75
     
1,553
     
2,152
     
102
     
(1,531
)
   
2,351
 
 Total assets
 
$
566
   
$
4,852
   
$
4,030
   
$
486
   
$
(4,906
)
 
$
5,028
 
 
                                               
Current liabilities
   
57
     
205
     
366
     
77
     
     
705
 
Intercompany payable
   
     
     
3,375
     
     
(3,375
)
   
 
Other long-term liabilities
   
562
     
3,769
     
39
     
6
     
     
4,376
 
Redeemable non-controlling interest
   
12
     
     
     
     
     
12
 
Stockholders' equity (deficit)
   
(65
)
   
878
     
250
     
403
     
(1,531
)
   
(65
)
Total liabilities and stockholders' equity (deficit)
 
$
566
   
$
4,852
   
$
4,030
   
$
486
   
$
(4,906
)
 
$
5,028
 
 
17

Condensed Supplemental Consolidated Statements of Operations
 
 
 
Quarterly Period Ended July 2, 2016
 
 
 
Parent
   
Issuer
   
Guarantor
Subsidiaries
   
Non-
Guarantor
Subsidiaries
   
Eliminations
   
Total
 
Net sales
 
$
   
$
150
   
$
1,081
   
$
414
   
$
   
$
1,645
 
Cost of goods sold
   
     
140
     
834
     
322
     
     
1,296
 
Selling, general and administrative
   
     
6
     
93
     
30
     
     
129
 
Amortization of intangibles
   
     
2
     
27
     
6
     
     
35
 
Restructuring and impairment charges
   
     
     
1
     
5
     
     
6
 
Operating income
   
     
2
     
126
     
51
     
     
179
 
Debt extinguishment
   
     
4
     
     
     
     
4
 
Other expense (income), net
   
     
4
     
(4
)
   
(18
)
   
     
(18
)
Interest expense, net
   
     
9
     
63
     
1
     
     
73
 
Equity in net income of subsidiaries
   
(120
)
   
(119
)
   
     
     
239
     
 
Income (loss) before income taxes
   
120
     
104
     
67
     
68
     
(239
)
   
120
 
Income tax expense (benefit)
   
24
     
4
     
1
     
14
     
(19
)
   
24
 
Consolidated net income (loss)
 
$
96
   
$
100
   
$
66
   
$
54
   
$
(220
)
 
$
96
 
Comprehensive net income (loss)
 
$
96
   
$
98
   
$
65
   
$
38
   
$
(220
)
 
$
77
 

 
 
Quarterly Period Ended June 27, 2015
 
 
 
Parent
   
Issuer
   
Guarantor
Subsidiaries
   
Non-
Guarantor
Subsidiaries
   
Eliminations
   
Total
 
Net sales
 
$
   
$
155
   
$
961
   
$
125
   
$
   
$
1,241
 
Cost of goods sold
   
     
121
     
773
     
109
     
     
1,003
 
Selling, general and administrative
   
     
17
     
63
     
12
     
     
92
 
Amortization of intangibles
   
     
2
     
18
     
2
     
     
22
 
Restructuring and impairment charges
   
     
     
3
     
     
     
3
 
Operating income
   
     
15
     
104
     
2
     
     
121
 
Debt extinguishment
   
     
94
     
     
     
     
94
 
Other expense (income), net
   
     
(2
)
   
3
     
1
     
     
2
 
Interest expense, net
   
     
6
     
37
     
4
     
     
47
 
Equity in net income of subsidiaries
   
22
     
(60
)
   
     
     
38
     
 
Income (loss) before income taxes
   
(22
)
   
(23
)
   
64
     
(3
)
   
(38
)
   
(22
)
Income tax expense (benefit)
   
(9
)
   
(10
)
   
     
1
     
9
     
(9
)
Consolidated net income (loss)
 
$
(13
)
 
$
(13
)
 
$
64
   
$
(4
)
 
$
(47
)
 
$
(13
)
Comprehensive net income (loss)
 
$
(13
)
 
$
(11
)
 
$
64
   
$
(2
)
 
$
(47
)
 
$
(9
)

18


 
 
Three Quarterly Periods Ended July 2, 2016
 
 
 
Parent
   
Issuer
   
Guarantor
Subsidiaries
   
Non-
Guarantor
Subsidiaries
   
Eliminations
   
Total
 
Net sales
 
$
   
$
442
   
$
3,143
   
$
1,286
   
$
   
$
4,871
 
Cost of goods sold
   
     
373
     
2,490
     
1,022
     
     
3,885
 
Selling, general and administrative
   
     
89
     
251
     
81
     
     
421
 
Amortization of intangibles
   
     
6
     
77
     
23
     
     
106
 
Restructuring and impairment charges
   
     
     
23
     
6
     
     
29
 
Operating income
   
     
(26
)
   
302
     
154
     
     
430
 
Debt extinguishment
   
     
4
     
     
     
     
4
 
Other expense (income), net
   
     
15
     
(11
)
   
(25
)
   
     
(21
)
Interest expense, net
   
     
27
     
158
     
37
     
     
222
 
Equity in net income of subsidiaries
   
(225
)
   
(258
)
   
     
     
483
     
 
Income (loss) before income taxes
   
225
     
186
     
155
     
142
     
(483
)
   
225
 
Income tax expense (benefit)
   
66
     
23
     
2
     
36
     
(61
)
   
66
 
Consolidated net income (loss)
 
$
159
   
$
163
   
$
153
   
$
106
   
$
(422
)
 
$
159
 
Comprehensive net income (loss)
 
$
159
   
$
152
   
$
152
   
$
145
   
$
(422
)
 
$
186
 
                                                 
Consolidating Statement of Cash Flows
                                               
Cash Flow from Operating Activities
 
$
   
$
23
   
$
382
   
$
162
   
$
   
$
567
 
Cash Flow from Investing Activities
                                               
Additions to  property, plant, and equipment
   
     
(13
)
   
(181
)
   
(34
)
   
     
(228
)
Proceeds from sale of assets
   
     
     
4
     
     
     
4
 
(Contributions) distributions to/from subsidiaries
   
(20
)
   
(2,240
)
   
     
     
2,260
     
 
Intercompany advances (repayments)
   
     
11
     
     
     
(11
)
   
 
Acquisition of business, net of cash acquired
   
     
     
(291
)
   
(1,992
)
   
     
(2,283
)
Other investing activities, net
   
     
(11
)
   
     
     
     
(11
)
Net cash from investing activities
   
(20
)
   
(2,253
)
   
(468
)
   
(2,026
)
   
2,249
     
(2,518
)
 
                                               
Cash Flow from Financing Activities
                                               
Proceeds from long-term debt
   
     
2,490
     
     
     
     
2,490
 
Purchase of non-controlling interest
   
     
     
(66
)
   
     
     
(66
)
Proceeds from issuance of common stock
   
20
     
     
     
     
     
20
 
Payment of tax receivable agreement
   
(57
)
   
     
     
     
     
(57
)
Repayments on long-term borrowings
   
     
(356
)
   
     
(34
)
   
     
(390
)
Contribution from Parent
   
     
     
291
     
1,969
     
(2,260
)
   
 
Debt financing costs
   
     
(38
)
   
     
     
     
(38
)
Changes in intercompany balances
   
57
     
     
(110
)
   
42
     
11
     
 
Net cash from financing activities
   
20
     
2,096
     
115
     
1,977
     
(2,249
)
   
1,959
 
 
                                               
Effect of exchange rate changes on cash
   
     
     
     
     
     
 
 
                                               
Net change in cash
   
     
(134
)
   
29
     
113
     
     
8
 
Cash and cash equivalents at beginning of period
   
     
163
     
     
65
     
     
228
 
Cash and cash equivalents at end of period
 
$
   
$
29
   
$
29
   
$
178
   
$
   
$
236
 
 
19


 
 
Three Quarterly Periods Ended June 27, 2015
 
 
 
Parent
   
Issuer
   
Guarantor
Subsidiaries
   
Non—
Guarantor
Subsidiaries
   
Eliminations
   
Total
 
Net sales
 
$
   
$
464
   
$
2,871
   
$
350
   
$
   
$
3,685
 
Cost of goods sold
   
     
394
     
2,366
     
277
     
     
3,037
 
Selling, general and administrative
   
     
50
     
183
     
33
     
     
266
 
Amortization of intangibles
   
     
6
     
58
     
6
     
     
70
 
Restructuring and impairment charges
   
     
     
11
     
     
     
11
 
Operating income (loss)
   
     
14
     
253
     
34
     
     
301
 
Debt extinguishment
   
     
94
     
     
     
     
94
 
Other expense (income), net
   
     
(1
)
   
2
     
1
     
     
2
 
Interest expense, net
   
     
19
     
119
     
14
     
     
152
 
Equity in net income of subsidiaries
   
(53