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EX-32.1 - EXHIBIT 32.1 CEO CERTIFICATION SEC 1350 - BERRY PLASTICS CORPex321.htm
EX-32.2 - EXHIBIT 32.2 CFO CERTIFICATION SEC 1350 - BERRY PLASTICS CORPex322.htm
EX-31.1 - EXHIBIT 31.1 CEO CERTIFICATION - BERRY PLASTICS CORPex311.htm
EX-31.2 - EXHIBIT 31.2 CFO CERTIFICATION - BERRY PLASTICS CORPex312.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 April 2, 2011
or
[   ]         Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
                                           Commission File Number 033-75706-01
                                  BERRY PLASTICS CORPORATION
                              (Exact name of registrant as specified in its charter)
Delaware
35-1814673
(State or other jurisdiction
of incorporation or organization)
(IRS employer
identification number)

SEE TABLE OF ADDITIONAL REGISTRANT GUARANTORS

Registrant’s telephone number, including area code:  (812) 424-2904

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark whether the registrants:  (1) have 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).   Not applicable

Indicate by check mark whether the registrants are large accelerated filers, accelerated filers, or non-accelerated filers.  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]

Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).  Yes [   ]  No [X]

As of May 16, 2011, all of the outstanding 100 shares of the Common Stock, $.01 par value, of Berry Plastics Corporation were held by Berry Plastics Group, Inc.



 
 

 

Table of Additional Registrant Guarantors
 
Exact Name
Jurisdiction of Organization
Primary Standard Industrial Classification Code Number
I.R.S.  Employer Identification No.
Name, Address and Telephone Number of Principal Executive Offices
Aerocon, LLC
Delaware
3089
35-1948748
(a)
Berry Iowa, LLC
Delaware
3089
42-1382173
(a)
Berry Plastics Design, LLC
Delaware
3089
62-1689708
(a)
Berry Plastics Technical Services, Inc.
Delaware
3089
57-1029638
(a)
Berry Sterling Corporation
Delaware
3089
54-1749681
(a)
CPI Holding Corporation
Delaware
3089
34-1820303
(a)
Knight Plastics, LLC
Delaware
3089
35-2056610
(a)
Packerware, LLC
Delaware
3089
48-0759852
(a)
Pescor, Inc.
Delaware
3089
74-3002028
(a)
Poly-Seal, LLC
Delaware
3089
52-0892112
(a)
Venture Packaging, Inc.
Delaware
3089
51-0368479
(a)
Venture Packaging Midwest, Inc.
Delaware
3089
34-1809003
(a)
Berry Plastics Acquisition Corporation III
Delaware
3089
37-1445502
(a)
Berry Plastics Opco, Inc.
Delaware
3089
30-0120989
(a)
Berry Plastics Acquisition Corporation V
Delaware
3089
36-4509933
(a)
Berry Plastics Acquisition Corporation VIII
Delaware
3089
32-0036809
(a)
Berry Plastics Acquisition Corporation IX
Delaware
3089
35-2184302
(a)
Berry Plastics Acquisition Corporation X
Delaware
3089
35-2184301
(a)
Berry Plastics Acquisition Corporation XI
Delaware
3089
35-2184300
(a)
Berry Plastics Acquisition Corporation XII
Delaware
3089
35-2184299
(a)
Berry Plastics Acquisition Corporation XIII
Delaware
3089
35-2184298
(a)
Berry Plastics Acquisition Corporation XV, LLC
Delaware
3089
35-2184293
(a)
Kerr Group, LLC
Delaware
3089
95-0898810
(a)
Saffron Acquisition, LLC
Delaware
3089
94-3293114
(a)
Setco, LLC
Delaware
3089
56-2374074
(a)
Sun Coast Industries, LLC
Delaware
3089
59-1952968
(a)
Cardinal Packaging, Inc.
Ohio
3089
34-1396561
(a)
Covalence Specialty Adhesives LLC
Delaware
2672
20-4104683
(a)
Covalence Specialty Coatings LLC
Delaware
2672
20-4104683
(a)
Caplas LLC
Delaware
3089
20-3888603
(a)
Caplas Neptune, LLC
Delaware
3089
20-5557864
(a)
Captive Plastics Holding, LLC
Delaware
3089
20-1290475
(a)
Captive Plastics, LLC
Delaware
3089
22-1890735
(a)
Grafco Industries Limited Partnership
Maryland
3089
52-1729327
(a)
Rollpak Corporation
Indiana
3089
35-1582626
(a)
Pliant, LLC
Delaware
2673
43-2107725
(a)
Pliant Corporation International
Utah
2673
87-0473075
(a)
Uniplast Holdings, LLC
Delaware
2673
13-3999589
(a)
Uniplast U.S., Inc.
Delaware
2673
04-3199066
(a)
Berry Plastics SP, Inc.
Virginia
3089
52-1444795
(a)

(a)  101 Oakley Street, Evansville, IN 47710
 
 

 
-2-

 

CAUTIONARY STATEMENT REGARDING 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 certain forward-looking statements by our use of forward-looking terminology such as, but not limited to, "believes," "estimates," "intends," "plans," "likely," "will," "would," "could" and similar expressions that identify forward-looking statements.  All forward-looking statements involve risks and uncertainties.  Many risks and uncertainties are inherent in our industry and markets. Others are more specific to our operations.  The occurrence of the events described and the achievement of the expected results depend on many events, some or all of which are not predictable or within our control.  Actual results may differ materially from the forward-looking statements contained in this Form 10-Q.  Factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements 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 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;
·  
risks of competition, including foreign competition, in our existing and future markets;
·  
general business and economic conditions, particularly an economic downturn; and
·  
the other factors discussed in our Form 10-K for the fiscal year ended October 2, 2010 in the section titled “Risk Factors.”

Readers should carefully review the factors discussed in our Form 10-K for the fiscal year ended October 2, 2010 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 and should not place undue reliance on our forward-looking statements.  We undertake no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

AVAILABLE INFORMATION

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

 
-3-

 


Berry Plastics Corporation

Form 10-Q Index

For Quarterly Period Ended April 2, 2011

 
Part I.
Financial Information
 
Page No.
       
 
Item 1.
Financial Statements:
 
   
Consolidated Balance Sheets
5
   
Consolidated Statements of Operations
6
   
Consolidated Statements of Changes in Stockholders’ Equity
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
23
       
 
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
31
 
Item 4.
Controls and Procedures
32
       
Part II.
Other Information
   
       
 
Item 1.
Legal Proceedings
32
 
Item 1A.
Risk Factors
32
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
32
 
Item 3.
Defaults Upon Senior Securities
32
 
Item 4.
Submission of Matters to a Vote of Security Holders
33
 
Item 5.
Other Information
33
 
Item 6.
Exhibits
33
Signature
   
34
 

 
-4-

 

Berry Plastics Corporation
Consolidated Balance Sheets
(In Millions of Dollars)
   
April 2,
2011
   
October 2, 2010
 
Assets
 
(Unaudited)
       
Current assets:
           
Cash and cash equivalents
  $ 126     $ 148  
        Accounts receivable (less allowance for doubtful accounts of $12 at April 2, 2011 and $13 at October 2, 2010, respectively)
    490       485  
Inventories:
               
Finished goods
    314       316  
Raw materials and supplies
    232       267  
      546       583  
Deferred income taxes
    55       53  
Prepaid expenses and other current assets
    45       46  
Total current assets
    1,262       1,315  
                 
Property, plant and equipment:
               
Land, buildings and improvements
    242       261  
Equipment and construction in progress
    1,613       1,546  
      1,855       1,807  
Less accumulated depreciation
    743       661  
      1,112       1,146  
                 
Goodwill, intangible assets and deferred costs
    2,820       2,872  
Other assets
    349       297  
      3,169       3,169  
          Total assets
  $ 5,543     $ 5,630  
                 
Liabilities and stockholders' equity
               
Current liabilities:
               
Accounts payable
  $ 311     $ 362  
Accrued expenses and other current liabilities
    286       270  
Current portion of long-term debt
    31       29  
Total current liabilities
    628       661  
                 
Long-term debt, less current portion
    4,386       4,345  
Deferred income taxes
    189       223  
Other long-term liabilities
    138       144  
Total liabilities
    5,341       5,373  
                 
Commitments and contingencies
               
Stockholders' equity:
               
Parent company investment, net
    628       627  
Accumulated deficit
    (418 )     (347 )
Accumulated other comprehensive loss
    (8 )     (23 )
Total stockholders’ equity
    202       257  
          Total liabilities and stockholders' equity
  $ 5,543     $ 5,630  

                See notes to consolidated financial statements.

 
-5-

 

Berry Plastics Corporation
Consolidated Statements of Operations
(Unaudited)
 (In Millions of Dollars)

   
Quarterly Period Ended
   
Two Quarterly Periods Ended
 
   
April 2, 2011
   
April 3, 2010
   
April 2, 2011
   
April 3, 2010
 
Net sales
  $ 1,104     $ 1,056     $ 2,145     $ 1,935  
Costs and expenses:
                               
     Cost of goods sold
    939       913       1,841       1,660  
Selling, general and administrative
    96       88       186       176  
Restructuring and impairment charges
    10       3       31       9  
Other operating expenses
    7       6       17       33  
Operating income
    52       46       70       57  
                                 
Loss on extinguishment of debt
                68        
Other income, net
          (2 )     (2 )     (7 )
Interest expense
    80       72       160       142  
Interest income
    (26 )     (18 )     (48 )     (35 )
Net loss before income taxes
    (2 )     (6 )     (108 )     (43 )
Income tax benefit
          (2 )     (37 )     (10 )
Net loss
  $ (2 )   $ (4 )   $ (71 )   $ (33 )


                    See notes to consolidated financial statements.

 
-6-

 

Berry Plastics Corporation
Consolidated Statement of Changes in Stockholders' Equity
For the Quarterly Period Ended April 2, 2011 and April 3, 2010
(Unaudited)
(In Millions of Dollars)

   
Parent Company Investment
   
Accumulated Other Comprehensive
Loss
   
Accumulated
Deficit
   
Total
   
Comprehensive Income (Loss)
 
Balance at September 26, 2009
  $ 629     $ (28 )   $ (279 )   $ 322        
Stock compensation expense
    1                   1        
Net transfers to parent
    (1 )                 (1 )      
Derivative amortization
          2             2        
Net loss
                (33 )     (33 )   $ (33 )
Currency translation
          10             10       10  
Balance at April 3, 2010
  $ 629     $ (16 )   $ (312 )   $ 301     $ (23 )

   
Parent Company Investment
   
Accumulated Other Comprehensive
Loss
   
Accumulated
Deficit
   
Total
   
Comprehensive Income (Loss)
 
Balance at October 2, 2010
  $ 627     $ (23 )   $ (347 )   $ 257        
Stock compensation expense
    1                   1        
Derivative amortization
          1             1        
Net loss
                (71 )     (71 )   $ (71 )
Interest rate hedge, net of tax
          5             5       5  
Currency translation
          9             9       9  
Balance at April 2, 2011
  $ 628     $ (8 )   $ (418 )   $ 202     $ (57 )

                    See notes to consolidated financial statements.


 
-7-

 


Berry Plastics Corporation
Consolidated Statements of Cash Flows
(Unaudited)
(In Millions of Dollars)

   
Two Quarterly Periods Ended
 
 
 
April 2, 2011
   
April 3, 2010
 
Operating activities
           
Net loss
  $ (71 )   $ (33 )
Adjustments to reconcile net loss to net cash provided by operating activities:
               
Depreciation
    116       99  
          Amortization of intangibles
    53       52  
Non-cash interest expense
    9       11  
Non-cash interest income
    (48 )     (34 )
Other non-cash expense (income)
    15       (5 )
Deferred income tax benefit
    (39 )     (12 )
Loss on extinguishment of debt
    68        
Changes in operating assets and liabilities:
               
Accounts receivable, net
    (2 )     (19 )
Inventories
    39       (116 )
Prepaid expenses and other assets
    7       10  
Accounts payable and other liabilities
    (35 )     90  
Net cash provided by operating activities
    112       43  
Investing activities
               
Additions to property and equipment
    (94 )     (129 )
Proceeds from disposal of assets
    2       27  
Investment in Berry Plastics Group debt securities
          (18 )
Acquisition of businesses, net of cash acquired
    (2 )     (646 )
Net cash used for investing activities
    (94 )     (766 )
Financing activities
               
Proceeds from long-term borrowings
    800       777  
Repayments on long-term borrowings
    (824 )     (14 )
Debt financing costs
    (16 )     (26 )
Transfers to parent, net
          (1 )
Net cash provided by (used for) financing activities
    (40 )     736  
Effect of exchange rate changes on cash
           
Net increase (decrease) in cash
    (22 )     13  
Cash at beginning of period
    148       10  
Cash at end of period
  $ 126     $ 23  

                See notes to consolidated financial statements.

 
-8-

 

Berry Plastics Corporation
Notes to Consolidated Financial Statements
(Unaudited)
 (In Millions of dollars, except as otherwise noted)

1.  
Background and Nature of Operations

Berry Plastics Corporation (“Berry” or the “Company”) is one of the world’s leading manufacturers and marketers of plastic packaging products, plastic film products, specialty adhesives and coated products.  Berry is a wholly-owned subsidiary of Berry Plastics Group, Inc. (“Berry Group”) which is primarily owned by affiliates of Apollo Management, L.P. (“Apollo”) and Graham Partners. Berry’s key principal products include containers, drink cups, bottles, closures and overcaps, tubes and prescription containers, trash bags, stretch films and tapes which we sell into a diverse selection of attractive and stable end markets, including food and beverage, healthcare, personal care, quick service and family dining restaurants, custom and retail, agricultural, horticultural, institutional, industrial, construction and automotive.  Berry, through its wholly-owned subsidiaries, operates in four primary segments:  Rigid Open Top, Rigid Closed Top, Specialty Films, and Tapes, Bags and Coatings.

2.  
Basis of Presentation

The accompanying unaudited Consolidated Financial Statements of Berry have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions for Form 10-Q and Article 10 of Regulation S-X of the Securities Act of 1934.  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.  The accompanying financial statements include the results of the Company and its wholly owned subsidiaries.  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 ended October 2, 2010.  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.  Certain amounts in the prior year financial statements and related notes have been reclassified to conform to the current year presentation.

Related Party Transactions and Allocations
The Company has recorded management fees of $2 and $2 for the quarterly period ended and $4 and $3 for the two quarterly periods ended April 2, 2011 and April 3, 2010, respectively, charged by Apollo and other investors to Berry Group and recorded income taxes to push down the respective amounts that relate to the consolidated operations of the Company.  Parent company investment, net in our Consolidated Balance Sheets includes the equity from Berry Group that was invested in Berry by Apollo and other shareholders.  As part of the acquisition of Pliant Corporation (“Pliant”) during fiscal 2010, the Company paid to Apollo and Graham $6 of transaction costs which has been recorded in Other operating expenses in our Consolidated Statements of Operations.  In addition, as part of the Pliant transaction, Apollo and Graham received a combined cash liquidation settlement of approximately $22 for their pre-bankruptcy investment position in Pliant which was paid by the Company as part of the purchase price of Pliant.

As of April 2, 2011, BP Parallel LLC, a non-guarantor subsidiary of the Company, had invested $191 to purchase assignments of $548 of the Berry Group’s senior unsecured term loan (“Senior Unsecured Term Loan”).  The Company has the intent and ability to hold these securities to maturity.  The investment is stated at amortized cost and the discount is being accreted under the effective interest method to interest income until the maturity of the debt.  The Company has recorded their investment in Other assets in the Consolidated Balance Sheets and is recording the non-cash interest income and the accretion income from the discount on the purchase of Senior Unsecured Term Loan in Interest income in the Consolidated Statements of Operations.  The Company recognized interest and accretion income of $26 and $18 for the quarterly period ended and $48 and $34 for the two quarterly

 
-9-

 

periods ended April 2, 2011 and April 3, 2010, respectively.  The carrying value of these investments was $335 at April 2, 2011.  The net outstanding balance of the Senior Unsecured Term Loan was $54 at April 2, 2011.

3.  Acquisition

Pliant Corporation

In December 2009, the Company obtained control of 100% of the capital stock of Pliant Corporation (“Pliant”) upon Pliant’s emergence from reorganization pursuant to a proceeding under Chapter 11 of the Bankruptcy Code for a purchase price of approximately $600 ($574, net of cash acquired).   Pliant is a leading manufacturer of value-added films and flexible packaging for food, personal care, medical, agricultural and industrial applications.  The acquisition was accounted for as a business combination using the purchase method of accounting.  The Company has recognized goodwill on this transaction as a result of expected synergies.  Goodwill will not be deductible for tax purposes.  The following table summarizes the final allocation of purchase price and the estimated fair values of the assets acquired and liabilities assumed at the date of the acquisition:
 
Working capital
  $ 126  
Property and equipment
    242  
Intangible assets
    119  
Goodwill
    226  
Other long-term liabilities
    (113 )
Net assets acquired
  $ 600  

Pro forma net sales and pro forma net loss for the two quarterly periods ended April 3, 2010 was $2,097 and $65, respectfully.  The pro forma net sales and net loss assume that the Pliant acquisition had occurred as of the beginning of the respective periods.

The 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 Pliant Acquisition been consummated at the beginning of the respective period, nor is it necessarily indicative of future operating results.  Further, the information reflects only pro forma adjustments for additional interest expense, amortization and closing expenses, net of the applicable income tax effects.

Superfos Packaging, Inc.

In December 2009, the Company acquired 100% of the outstanding common stock of Superfos Packaging, Inc., a manufacturer of injection molded plastic rigid open top containers and other plastic packaging products primarily for food, industrial and personal care end markets.  The newly added business is primarily operated in the Company’s Rigid Open Top reporting segment.  The purchase price was approximately $82 ($80, net of cash acquired) and was funded from cash on hand and the revolving line of credit.  Pro forma results have not been presented, as they do not differ materially from reported historical results.

 
-10-

 

 
 
4.  Restructuring

The table below sets forth the Company’s estimate of the total cost of recent restructuring programs, the cumulative portion recognized through April 2, 2011 and the portion expected to be recognized in a future period:

   
Expected Total Costs
   
Recognized through April 2, 2011
   
To be Recognized in Future
 
Severance and termination benefits
  $ 25     $ 25     $  
Facility exit costs
    45       42       3  
Asset impairment
    61       61        
Other
    4       4        
Total
  $ 135     $ 132     $ 3  

The Company incurred restructuring costs related to severance, asset impairment and facility exit costs of $10 and $3 for the quarterly period ended and $31 and $9 for the two quarterly periods ended as of April 2, 2011 and April 3, 2010, respectively.

The tables below set forth the significant components of the restructuring charges recognized for the quarterly period ended and two quarterly periods ending April 2, 2011 and April 3, 2010, by segment:

   
Quarterly Period Ended
   
Two Quarterly Periods Ended
 
   
April 2, 2011
   
April 3, 2010
   
April 2, 2011
   
April 3, 2010
 
Rigid Open Top
                       
Severance & termination benefits
  $ 1     $     $ 1     $  
Facility exit costs
          2             3  
     Total
  $ 1     $ 2     $ 1     $ 3  
                                 
Rigid Closed Top
                               
Severance & termination benefits
  $ 2     $     $ 2     $  
     Total
  $ 2     $     $ 2     $  
                                 
Specialty Films
                               
Severance & termination benefits
  $ 2     $ 1     $ 5     $ 5  
Facility exit costs
    2             3       1  
Asset impairment
    1             4        
     Total
  $ 5     $ 1     $ 13     $ 6  
                                 
Tapes, Bags and Coatings
                               
Severance & termination benefits
  $ 1     $     $ 1     $  
Facility exit costs
    1             3        
Asset impairment
                12        
     Total
  $ 2     $     $ 15     $  
                                 
Consolidated
                               
Severance & termination benefits
  $ 6     $ 1     $ 9     $ 5  
Facility exit costs
    3       2       6       4  
Asset impairment
    1             16        
     Total
  $ 10     $ 3     $ 31     $ 9  
                                 


 
-11-

 

The table below sets forth the activity with respect to the restructuring accrual at October 2, 2010 and April 2, 2011:

   
Employee
Severance
and Benefits
   
Facilities
Exit Costs
   
Non-cash
   
Total
 
Balance at fiscal year end 2009
  $     $ 3     $     $ 3  
Charges
    8       14       19       41  
Non-cash asset impairment
                (19 )     (19 )
Acquisition liability assumed
    1                   1  
Cash payments
    (6 )     (14 )           (20 )
Balance at October 2, 2010
    3       3             6  
                                 
Charges
    9       6       16       31  
Non-cash asset impairment
                (16 )     (16 )
Cash payments
    (5 )     (6 )           (11 )
Balance at April 2, 2011
  $ 7     $ 3     $     $ 10  

5.  Accrued Expenses and Other Current Liabilities

The following table sets forth the totals included in Accrued expenses and other current liabilities on the Consolidated Balance Sheets.

   
April 2, 2011
   
October 2, 2010
 
Employee compensation, payroll and other taxes
  $ 75     $ 80  
Interest
    75       54  
Restructuring
    10       6  
Rebates
    56       50  
Other
    70       80  
    $ 286     $ 270  


 
-12-

 

6.  Long-Term Debt

Long-term debt consists of the following:

 
Maturity Date
 
April 2, 2011
   
October 2, 2010
 
Term loan
April 2015
  $ 1,152     $ 1,158  
Revolving line of credit
April 2013
           
First Priority Senior Secured Floating Rate Notes
February 2015
    681       681  
8¼%  First Priority Senior Secured Notes
November 2015
    370       370  
8⅞% Second Priority Senior Secured Notes
September 2014
          773  
Second Priority Senior Secured Floating Rate Notes
September 2014
    212       212  
9 ½% Second Priority Senior Secured Notes
May 2018
    500       500  
9 ¾% Second Priority Senior Secured Notes
January 2021
    800        
11% Senior Subordinated Notes
September 2016
    455       455  
10¼% Senior Subordinated Notes
March 2016
    168       168  
Debt discount, net
      (14 )     (33 )
Capital leases and other
Various
    93       90  
        4,417       4,374  
Less current portion of long-term debt
      (31 )     (29 )
      $ 4,386     $ 4,345  

The current portion of long-term debt consists of $12 of principal payments on the term loan and $19 of principal payments related to capital lease obligations.  The Company was in compliance with its covenants as of April 2, 2011.

At April 2, 2011, there was no outstanding balance on the revolving line of credit and $37 in letters of credit outstanding.  At April 2, 2011, the Company had unused borrowing capacity of $445 (net of defaulting lenders) under the revolving line of credit subject to the solvency of the Company’s lenders to fund their obligations and the Company’s borrowing base calculations.

9¾% Second Priority Senior Secured Notes
In November 2010, the Company completed a private placement of $800 aggregate principal amount of 9¾% Second Priority Senior Secured Notes due in January 2021. In connection with the private placement we conducted tender offers to purchase, for cash, our 8⅞% Second Priority Senior Secured Notes due in 2014.  The private placement resulted in the Company recording non-cash write offs of $14 for deferred financing fees, $17 of debt discounts and cash premiums of $37 included in Loss on extinguishment of debt in the Consolidated Statement of Operations.  The proceeds of this offering were used to fund the repurchase of the 8⅞% Second Priority Senior Secured Notes pursuant to the tender offers and subsequent redemption of such notes.

The Company’s $800 in aggregate principal amount of 9¾% Second Priority Senior Secured Notes mature in 2021.  No principal payments are required prior to maturity.  Interest on the notes is due semi-annually on January 15 and July 15, commencing in July 2011.  The notes are guaranteed on a second priority secured basis by substantially all of the Company’s existing and future guarantor subsidiaries that secure its obligations under its senior secured credit facilities, subject to certain exceptions and rank equally in right of payment to all existing and future senior secured indebtedness.  The Company was in compliance with all covenants at April 2, 2011.

 
-13-

 

7.  Financial Instruments and Fair Value Measurements

As part of the overall risk management, the Company uses derivative instruments to reduce exposure to changes in interest rates attributed to the Company’s floating-rate borrowings.  For those derivative instruments that are designated and qualify as hedging instruments, the Company must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation.  To the extent hedging relationships are found to be effective, as determined by FASB guidance, changes in fair value of the derivatives are offset by changes in the fair value of the related hedged item are recorded to Accumulated other comprehensive loss. Management believes hedge effectiveness is evaluated properly in preparation of the financial statements.

Cash Flow Hedging Strategy
For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative instrument is reported as a component of Accumulated other comprehensive loss and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings.

In August 2007, the Company entered into two separate interest rate swap transactions to protect $600 of the outstanding variable rate term loan debt from future interest rate volatility (the “2007 Swaps”).  The swap agreements became effective in November 2007.  The first agreement had a notional amount of $300 and became effective in November 2007 and swaps three month variable LIBOR contracts for a fixed two year rate of 4.875% and expired in November 2009.  The second agreement had a notional amount of $300 and became effective in November 2007 and swaps three month variable LIBOR contracts for a fixed three year rate of 4.920% and expired in November 2010.  In 2008, 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 changes in fair value in the Consolidated Statement of Operations and amortized the previously recorded unrealized loss in Accumulated other comprehensive loss to Interest expense through the end of the respective swap agreements.

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 “2010 Swaps”).  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 global financial institutions.  The Company accounts for the swaps as qualifying cash flow hedges.

 
Liability Derivatives
 
Derivatives not designated as hedging instruments under FASB guidance
Balance Sheet Location
 
April 2, 2011
   
October 2, 2010
 
      Interest rate swaps – 2007 Swaps
Accrued exp and other current liabilities
  $     $ 1  

 
Asset Derivatives
 
Derivatives designated as hedging instruments under FASB guidance
Balance Sheet Location
 
April 2, 2011
   
October 2, 2010
 
      Interest rate swaps – 2010 Swaps
Other assets
  $ 8     $  


 
-14-

 

The effect of the derivative instruments on the Consolidated Statement of Operations for the quarterly period ended and two quarterly periods ended April 2, 2011 and April 3, 2010, are as follows:

     
Quarterly Period Ended
   
Two Quarterly Periods Ended
 
     
April 2, 2011
   
April 3, 2010
   
April 2, 2011
   
April 3, 2010
 
Derivatives not designated
as hedging instruments under
FASB guidance
Statement of Operations Location
                       
 Interest rate swaps – 2007 Swaps
Other income
  $     $ (3 )   $ (1 )   $ (7 )
 
Interest expense
  $     $ 2     $ 1     $ 4  

The Company adopted the fair value disclosure of financial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis.  The Financial Instruments section of the Accounting Standards Codification (“Codification” or “ASC”) permits an entity to measure certain financial assets and financial liabilities at fair value that were not previously required to be measured at fair value.  We have not elected to measure any financial assets or financial liabilities at fair value that were not previously required to be measured at fair value.
 
The Fair Value Measurements and Disclosures section of the Codification 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, investments, long-term debt, interest rate swap agreements and capital lease obligations.  The fair value of our investments exceeded book value by $142 and $172 at April 2, 2011 and October 2, 2010, respectively.  The following table summarized our long-term indebtedness for which the book value was in excess of the fair value based on quoted market prices:

 
April 2, 2011
 
October 2, 2010
First Priority Senior Secured Floating Rate Notes
3
 
34
8⅞% Second Priority Senior Secured Notes
n/a
 
17
9 ½% Second Priority Senior Secured Notes
5
 
31
9 ¾% Second Priority Senior Secured Notes
12
 
n/a
Second Priority Senior Secured Floating Rate Notes
13
 
32
11% Senior Subordinated Notes
7
 
34
10 ¼% Senior Subordinated Notes
3
 
13


 
-15-

 

8.  Income Taxes

The effective tax rate from continuing operations was 34% and 23% for the two quarterly periods ended April 2, 2011 and April 3, 2010, 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
   
Two Quarterly Periods Ended
 
   
April 2, 2011
   
April 3, 2010
   
April 2, 2011
   
April 3, 2010
 
Income tax benefit computed at statutory rate
  $ (1 )   $ (2 )   $ (38 )   $ (15 )
State income tax benefit, net of federal taxes
                (1 )     (1 )
Change in valuation allowance
    1             3       1  
Non-deductible ASC 805 costs
                      4  
Other
                (1 )     1  
Income tax benefit
  $     $ (2 )   $ (37 )   $ (10 )


 
-16-

 

9.  Operating Segments

Berry’s operations are organized into four reporting segments: Rigid Open Top, Rigid Closed Top, Specialty Films and Tapes, Bags and Coatings.  The Company has manufacturing and distribution centers in the United States, Canada, Mexico, Belgium, Australia, Germany and India.  The North American operation represents 92% of the Company’s net sales, 99% of total long-lived assets and 95% of the total assets.  Selected information by reportable segment is presented in the following table:

   
Quarterly Period Ended
   
Two Quarterly Periods Ended
 
   
April 2, 2011
   
April 3, 2010
   
April 2, 2011
   
April 3, 2010
 
Net sales:
                       
Rigid Open Top
  $ 296     $ 277     $ 579     $ 539  
Rigid Closed Top
    254       233       480       462  
Specialty Films
    406       386       801       599  
Tapes, Bags and Coatings
    148       160       285       335  
Total net sales
  $ 1,104     $ 1,056     $ 2,145     $ 1,935  
Operating income (loss):
                               
Rigid Open Top
  $ 31     $ 28     $ 54     $ 49  
Rigid Closed Top
    22       17       38       33  
Specialty Films
    (3 )     3       (8 )     (23 )
Tapes, Bags and Coatings
    2       (2 )     (14 )     (2 )
Total operating income
  $ 52     $ 46     $ 70     $ 57  
Depreciation and amortization:
                               
Rigid Open Top
  $ 25     $ 24     $ 49     $ 46  
Rigid Closed Top
    23       23       46       46  
Specialty Films
    28       22       53       36  
Tapes, Bags and Coatings
    10       11       21       23  
Total depreciation and amortization
  $ 86     $ 80     $ 169     $ 151  


   
April 2, 2011
   
October 2, 2010
 
Total assets:
           
Rigid Open Top
  $ 1,996     $ 2,019  
Rigid Closed Top
    1,658       1,647  
Specialty Films
    1,386       1,410  
Tapes, Bags and Coatings
    503       554  
Total assets
  $ 5,543     $ 5,630  

Goodwill:
           
Rigid Open Top
  $ 690     $ 691  
Rigid Closed Top
    774       771  
Specialty Films
    240       238  
Tapes, Bags and Coatings
           
Total goodwill
  $ 1,704     $ 1,700  

 
-17-

 


10.  Condensed Consolidating Financial Information

The Company 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% wholly owned by the parent company and the guarantor subsidiaries unconditionally guarantee such debt on a joint and several basis.  Presented below is condensed consolidating financial information for the parent company, guarantor subsidiaries and non-guarantor subsidiaries.  The equity method has been used with respect to investments in subsidiaries.  The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions.

   
April 2, 2011
 
   
Parent
Company
   
Guarantor Subsidiaries
   
Non-guarantor Subsidiaries
   
Eliminations
   
 
Consolidated
 
Consolidating Balance Sheet
                             
Current assets
  $ 375     $ 761     $ 126     $     $ 1,262  
Net property and equipment
    155       884       73             1,112  
Other noncurrent assets
    4,386       2,564       476       (4,257 )     3,169  
Total assets
  $ 4,916     $ 4,209     $ 675     $ (4,257 )   $ 5,543  
                                         
Current liabilities
  $ 265     $ 317     $ 47     $ (1 )   $ 628  
Noncurrent liabilities
    4,449       354       21       (111 )     4,713  
Equity (deficit)
    202       3,538       607       (4,145 )     202  
Total liabilities and equity (deficit)
  $ 4,916     $ 4,209     $ 675     $ (4,257 )   $ 5,543  

   
October 2, 2010
 
   
Parent Company
   
Guarantor Subsidiaries
   
Non-guarantor Subsidiaries
   
Eliminations
   
 
Consolidated
 
Consolidating Balance Sheet
                             
Current assets
  $ 405     $ 788     $ 122     $     $ 1,315  
Net property and equipment
    179       894       73             1,146  
Other noncurrent assets
    4,348       2,597       428       (4,204 )     3,169  
Total assets
  $ 4,932     $ 4,279     $ 623     $ (4,204 )   $ 5,630  
                                         
Current liabilities
  $ 264     $ 353     $ 45     $ (1 )   $ 661  
Noncurrent liabilities
    4,411       388       24       (111 )     4,712  
Equity (deficit)
    257       3,538       554       (4,092 )     257  
Total liabilities and equity (deficit)
  $ 4,932     $ 4,279     $ 623     $ (4,204 )   $ 5,630  
 
 
 
-18-

 

 
   
Quarterly Period Ended April 2, 2011
 
   
Parent
Company
   
Guarantor
Subsidiaries
   
Non-
Guarantor
Subsidiaries
   
Eliminations
   
Total
 
Net sales
  $ 167     $ 842     $ 95     $     $ 1,104  
Cost of sales
    152       704       83             939  
Selling, general and administrative expenses
    14       74       8             96  
Restructuring and impairment charges, net
    1       9                   10  
Other operating expenses
    1       4       2             7  
Operating income (loss)
    (1 )     51       2             52  
Interest expense (income), net
    12       61       (19 )           54  
Equity in net income of subsidiaries
    (11 )                 11        
Income (loss) before income taxes
    (2 )     (10 )     21       (11 )     (2 )
Income tax expense (benefit)
          (1 )     1              
Net income (loss)
  $ (2 )   $ (9 )   $ 20     $ (11 )   $ (2 )


   
Quarterly Period Ended April 3, 2010
 
   
Parent
Company
   
Guarantor
Subsidiaries
   
Non-
Guarantor
Subsidiaries
   
Eliminations
   
Total
 
Net sales
  $ 181     $ 785     $ 90     $     $ 1,056  
Cost of sales
    169       667       77             913  
Selling, general and administrative expenses
    14       66       8             88  
Restructuring charges
          3                   3  
Other operating expenses
    2       4                   6  
Operating income (loss)
    (4 )     45       5             46  
Other income
    (2 )                       (2 )
Interest expense (income), net
    82       (14 )     (14 )           54  
Equity in net income of subsidiaries
    (80 )                 80        
Income (loss) before income taxes
    (4 )     59       19       (80 )     (6 )
Income tax benefit
          (2 )                 (2 )
Net income (loss)
  $ (4 )   $ 61     $ 19     $ (80 )   $ (4 )


 
-19-

 

 
   
Two Quarterly Periods Ended April 2, 2011
 
   
 
Parent Company
   
Guarantor Subsidiaries
   
Non-guarantor Subsidiaries
   
Eliminations
   
 
Consolidated
 
Consolidating Statement of Operations
                             
Net sales
  $ 339     $ 1,624     $ 182     $     $ 2,145  
Cost of goods sold
    310       1,372       159             1,841  
Selling, general, and administrative expense
    27       144       15             186  
Restructuring charges
    16       15                   31  
Other operating expenses
    2       12       3             17  
Operating income (loss)
    (16 )     81       5             70  
Loss on extinguishment of debt
    68                         68  
Other income
    (2 )                       (2 )
Interest expense (income), net
    25       122       (35 )           112  
Equity in net income of subsidiary
    (36 )                 36        
Income (loss) before income taxes
    (71 )     (41 )     40       (36 )     (108 )
Income tax expense (benefit)
          (40 )     3             (37 )
Net income (loss)
  $ (71 )   $ (1 )   $ 37     $ (36 )   $ (71 )

     Consolidating Statement of Cash Flows
                             
Net cash flow from operating activities
  $ 29     $ 78     $ 5     $     $ 112  
Investing activities:
                                       
 Purchase of property, plant, and equipment
    (8 )     (81 )     (5 )           (94 )
 Proceeds from disposal of assets
          2                   2  
 Acquisition of business net of cash acquired
    (2 )                       (2 )
Net cash flow from investing activities
    (10 )     (79 )     (5 )           (94 )
Financing activities:
                                       
 Proceeds from long-term borrowings
    800                         800  
 Payments on long-term borrowings
    (824 )                       (824 )
 Debt financing costs
    (16 )                       (16 )
 Equity contributions (distributions), net
                             
Net cash flow from financing activities
    (40 )                       (40 )
Effect of exchange rate changes on cash
                             
Net decrease in cash
    (21 )     (1 )                 (22 )
Cash at beginning of period
    132       2       14             148  
Cash at end of period
  $ 111     $ 1     $ 14     $     $ 126  


 
-20-

 

 
   
Two Quarterly Periods Ended April 3, 2010
 
   
 
Parent Company
   
Guarantor Subsidiaries
   
Non-guarantor Subsidiaries
   
Eliminations
   
 
Consolidated
 
Consolidating Statement of Operations
                             
Net sales
  $ 376     $ 1,410     $ 149     $     $ 1,935  
Cost of goods sold
    352       1,183       125             1,660  
Selling, general, and administrative expense
    30       131       15             176  
Restructuring charges
          7       2             9  
Other operating expenses
    3       27       3             33  
Operating income (loss)
    (9 )     62       4             57  
Other income
    (7 )                       (7 )
Interest expense (income), net
    165       (30 )     (28 )           107  
Equity in net income of subsidiary
    (134 )                 134        
Income (loss) before income taxes
    (33 )     92       32       (134 )     (43 )
Income tax expense (benefit)
          (11 )     1             (10 )
Net income (loss)
  $ (33 )   $ 103     $ 31     $ (134 )   $ (33 )

     Consolidating Statement of Cash Flows
                             
Net cash flow from operating activities
  $ (40 )   $ 75     $ 8     $     $ 43  
    Investing activities:
                                       
 Purchase of property, plant, and equipment
    (25 )     (101 )     (3 )           (129 )
 Proceeds from disposal of assets
          27                   27  
 Investment in Berry Group, Inc.
                (18 )           (18 )
 Acquisition of business net of cash acquired
    (646 )                       (646 )
Net cash flow from investing activities
    (670 )     (75 )     (21 )           (766 )
    Financing activities:
                                       
 Proceeds from long-term borrowings
    775             2             777  
 Payments on long-term borrowings
    (14 )                       (14 )
 Debt financing costs
    (26 )                       (26 )
 Transfers to the parent, net
    (19 )           18             (1 )
Net cash flow from financing activities
    716             20             736  
Effect of exchange rate changes on cash
                             
Net increase in cash
    6             7             13  
Cash at beginning of period
    7             3             10  
Cash at end of period
  $ 13     $     $ 10     $     $ 23  


 
-21-

 


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.  Recent Financial Accounting Standards

In January, 2010, the FASB issued an amendment to standard “Fair Value Measurements and Disclosure,” to require reporting entities to separately disclose the amounts and business rationale for significant transfers in and out of Level 1 and Level 2 fair value measurements and separately present information regarding purchase, sale, issuance, and settlement of Level 3 fair value measures on a gross basis. This standard is effective for interim and annual reporting periods beginning after December 15, 2009 with the exception of disclosures regarding the purchase, sale, issuance, and settlement of Level 3 fair value measures which are effective for fiscal years beginning after December 15, 2010. We implemented the new standard effective in fiscal 2011.  The adoption did not have an impact on our consolidated financial statements.



 
-22-

 

Item 2.
Management’s Discussion and Analysis of Financial Condition and
Results of Operations (dollar amounts in millions)

Unless the context requires otherwise, references in this Management's Discussion and Analysis of Financial Condition and Results of Operations to “Company” refer to Berry Plastics Corporation, references to “we,” “our” or “us” refer to Berry Plastics Corporation 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.  The Company is a wholly owned subsidiary of Berry Plastics Group, Inc.  This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in our Form 10-K filed with the SEC for the fiscal year ended October 2, 2010 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

The Company maintains a selective and disciplined 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.  Most businesses we have acquired had profit margins that are lower than that of our existing business, which resulted in a temporary decrease in our margins.  The Company has historically achieved significant reductions in manufacturing and overhead costs of acquired companies by introducing advanced manufacturing processes, exiting low-margin businesses or product lines, reducing headcount, rationalizing facilities and machinery, applying best practices and capitalizing on economies of scale.  In connection with our acquisitions, we have in the past and may in the future incur charges related to these reductions and rationalizations.

The Company has a long history of acquiring and integrating companies.  The Company has been able to achieve these synergies by eliminating duplicative costs and rationalizing facilities and integrating the production into the most efficient operating facility.  While the expected benefits on earnings are estimated at the commencement of each transaction, once the execution of the plan and integration occur, the Company is generally unable to accurately estimate or track what the ultimate effects on future earnings have been due to systems integrations and movement of activities to multiple facilities.  The historical business combinations have not allowed the Company to accurately separate realized synergies compared to what was initially identified during the due diligence phase of each acquisition.

Recent Developments

In November 2010, the Company completed a private placement of $800 aggregate principal amount of 9¾% Second Priority Senior Secured Notes due in January 2021. In connection with the private placement we conducted tender offers to purchase for cash any and all of our outstanding 8⅞% Second Priority Senior Secured Notes due in 2014.  We also called for redemption all notes not validly tendered in the tender offers.  We used the proceeds of the new notes offering along with cash on hand to fund the repurchase of the notes pursuant to the tender offers and subsequent redemption of such notes.

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 swaps three month variable LIBOR contracts for a fixed three year rate of 0.8925%.  The second agreement had a notional amount of $500 and swaps three month variable LIBOR contracts for a fixed three year rate of 1.0235%.  Both agreements expire in 2013.

 
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Executive Summary

Business.  The Company operates four operating segments: Rigid Open Top, Rigid Closed Top, Specialty Films, and Tapes, Bags and Coatings.  The Rigid Open Top segment sells products in three categories including containers, foodservice items and home and party.  The Rigid Closed Top segment sells products in three categories including closures and overcaps, bottles and prescription containers and tubes.  The Specialty Films segment sells primarily agricultural film, stretch film, shrink film, engineered film, personal care film, flexible packaging products and PVC film to the agricultural, horticultural, institutional, foodservice, personal care, industrial and retail markets.  Our Tapes, Bags and Coatings segment sells specialty adhesive products, flexible packaging, trash bags and building materials to a variety of different industries including building and construction, retail, automotive, industrial and medical markets.

Raw Material Trends. Our primary raw material is plastic resin.  Polypropylene and polyethylene account for more than 90% of our plastic resin pound purchases.  The average industry prices, as published in industry sources, per pound by fiscal quarter were as follows:

   
Polyethylene Butene Film
   
Polypropylene
 
   
2011
   
2010
   
2009
   
2011
   
2010
   
2009
 
1st quarter
  $ .68     $ .71     $ .67     $ .78     $ .70     $ .56  
2nd quarter
    .72       .67       .59       .95       .82       .46  
3rd quarter
          .68       .64             .84       .53  
4th quarter
          .62       .68             .77       .67  

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.

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 impact of any one of these factors on our overall performance. We are impacted by our ability to maintain selling prices, manage fluctuations in raw material pricing and adapt to volume changes of our customers.  We incurred a dramatic increase in plastic resin prices starting in January 2011 which will have a negative impact on earnings in our rigid and specialty films segments due to the negative impact on the selling price to raw material relationship.  We are constantly focused on improving our overall profitability by implementing cost reduction programs for our manufacturing, selling and general and administrative expenses in order to manage inflationary cost pressures.

Results of Operations

Comparison of the Quarterly Period Ended April 2, 2011 (the “Quarter”) and the Quarterly Period Ended April 3, 2010 (the “Prior Quarter”)

Net Sales.  Net sales increased from $1,056 in the Prior Quarter to $1,104 in the Quarter.  This increase includes net selling price increases of 8% partially offset by a base volume decrease of 3%.  The following discussion in this section provides a comparison of net sales by business segment.
 
 
 
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Quarterly Period Ended
             
   
April 2, 2011
   
April 3, 2010
   
$ Change
   
% Change
 
Net sales:
                       
Rigid Open Top
  $ 296     $ 277     $ 19       7 %
Rigid Closed Top
    254       233       21       9 %
Specialty Films
    406       386       20       5 %
Tapes, Bags and Coatings
    148       160       (12 )     (8 %)
Total net sales
  $ 1,104     $ 1,056     $ 48       5 %

Net sales in the Rigid Open Top business increased from $277 in the Prior Quarter to $296 in the Quarter as a result of net selling price increases of 8% partially offset by a base volume decline of 1%.  The base volume decline is primarily attributed to a decrease in sales volumes in various container products.  Net sales in the Rigid Closed Top business increased from $233 in the Prior Quarter to $254 in the Quarter as a result of a base volume increase of 4% and net selling price increases of 5%.  The base volume increase is primarily attributed to increased sales volumes in our bottles, overcaps and closures product lines.  The Specialty Films business net sales increased from $386 in the Prior Quarter to $406 in the Quarter as a result of net selling price increases of 12% partially offset by a base volume decline of 7%.  The base volume decline is primarily attributed to a decrease in sales volumes in our engineered, institutional can liners, stretch and personal care product lines.  Net sales in the Tapes, Bags and Coatings business decreased from $160 in the Prior Quarter to $148 in the Quarter primarily attributed to a base volume decline of 13% partially offset by net selling price increases of 5%.  The base volume decline is primarily attributed to decreased sales volumes in our retail waste bag and sheeting product lines.
 
 
Operating Expenses.  Cost of goods sold increased from $913 in the Prior Quarter to $939 in the Quarter primarily as a result of higher raw material costs partially offset by a base volume decline.  Selling, general and administrative expenses increased from $88 in the Prior Quarter to $96 in the Quarter primarily as a result of increased accrued performance compensation partially offset by cost reductions.  Restructuring and impairment charges increased from $3 in the Prior Quarter to $10 in the Quarter primarily due to $6 of severance and $1 of non-cash fixed asset charges incurred in the Quarter.  Other operating expenses increased from $6 in the Prior Quarter to $7 in the Quarter.
 
 
Operating Income. Operating income increased from $46 in the Prior Quarter to $52 in the Quarter.  The following discussion in this section provides a comparison of operating income by business segment.

   
Quarterly Period Ended
             
   
April 2, 2011
   
April 3, 2010
   
$ Change
   
% Change
 
Operating income (loss):
                       
Rigid Open Top
  $ 31     $ 28     $ 3       11 %
Rigid Closed Top
    22       17       5       29 %
Specialty Films
    (3 )     3       (6 )     (200 %)
Tapes, Bags and Coatings
    2       (2 )     4       200 %
Total operating income
  $ 52     $ 46     $ 6       13 %

Operating income for the Rigid Open Top business increased from $28 in the Prior Quarter to $31 in the Quarter.  This increase is primarily the result of improved operating performance in manufacturing.  Operating income for the Rigid Closed Top business increased from $17 in the Prior Quarter to $22 in the Quarter.  This increase is the result of improved operating performance in manufacturing and increased base volume.  Operating income (loss) for the Specialty Films business decreased from an operating income of $3 in the Prior Quarter compared to an operating loss of $3 in the Quarter.  This decline is primarily attributable to restructuring charges and Pliant integration costs incurred in the Quarter.  The Tapes, Bags and Coatings business improved from an operating loss of $2 in the Prior Quarter to operating income of $2 in the Quarter.  The increase is primarily attributed to an improvement in sales mix.

Other Income, net. Other income decreased $2 from Prior Quarter due to the expiration of our 2007 Swap in November 2010.

 
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Interest Expense.  Interest expense increased from $72 in the Prior Quarter to $80 in the Quarter primarily as a result of increased borrowings.

Interest Income.  Interest income increased from $18 in the Prior Quarter to $26 in the Quarter primarily attributed to the non-cash interest and accretion income from our investments in Berry Group’s senior unsecured term loan.

Net Loss.  Net loss decreased from $4 in the Prior Quarter to $2 in the Quarter for the reasons discussed above.

Comparison of the Two Quarterly Periods Ended April 2, 2011 (the “YTD”) and the Two Quarterly Periods Ended April 3, 2010 (the “Prior YTD”)

Net Sales.  Net sales increased from $1,935 in the Prior YTD to $2,145 in the YTD.  This increase includes an acquisition volume increase of 9% and net selling price increases of 7% partially offset by a base volume decrease of 5%.  The base volume decline is partially attributed to the YTD consisting of a twenty six week period compared to a twenty seven week period for the Prior YTD.  The following discussion in this section provides a comparison of net sales by business segment.

   
Two Quarterly Periods Ended
             
   
April 2, 2011
   
April 3, 2010
   
$ Change
   
% Change
 
Net sales:
                       
Rigid Open Top
  $ 579     $ 539     $ 40       7 %
Rigid Closed Top
    480       462       18       4 %
Specialty Films
    801       599       202       34 %
Tapes, Bags and Coatings
    285       335       (50 )     (15 %)
Total net sales
  $ 2,145     $ 1,935     $ 210       11 %

Net sales in the Rigid Open Top business increased from $539 in the Prior YTD to $579 in the YTD as a result of net selling price increases of 8% and acquisition growth attributed to Superfos partially offset by a base volume decline of 1%.  The base volume decline is primarily attributed to the change in period weeks described above partially offset by increased sales in thermoformed drink cups.  Net sales in the Rigid Closed Top business increased from $462 in the Prior YTD to $480 in the YTD as a result of net price increases of 5% partially offset by base volume decline of 1%.  The base volume decline is primarily attributed to the change in period weeks described above.  The Specialty Films business net sales increased from $599 in the Prior YTD to $801 in the YTD as a result of net selling price increases of 10% and acquisition volume growth attributed to Pliant partially offset by a base volume decline of 4%.  The base volume decline is primarily attributed to decreased sales in our institutional can liners and stretch film product lines and the change in the period weeks described above.  Net sales in the Tapes, Bags and Coatings business decreased from $335 in the Prior YTD to $285 in the YTD primarily attributed to a base volume decline of 19% partially offset by net selling price increases of 4%.  The base volume decline is primarily attributed to the change in period weeks described above and decreased sales in our retail waste bag and sheeting product lines.
 
 
Operating Expenses.  Cost of goods sold increased from $1,660 in the Prior YTD to $1,841 in the YTD primarily as a result of the acquisition growth and higher raw material costs partially offset by a base sales volume decline.  Selling, general and administrative expenses increased from $176 in the Prior YTD to $186 in the YTD primarily as a result of the acquisition growth noted above, increased amortization of intangibles due to the Pliant and Superfos acquisitions and increased accrued performance compensation expense partially offset by cost reductions.  Restructuring and impairment charges increased from $9 in the Prior YTD to $31 in the YTD primarily due to severance and non-cash asset impairment charges.  Other operating expenses decreased from $33 in the Prior YTD to $17 in the YTD primarily due to acquisition costs related to Pliant and Superfos in the Prior YTD.
 
 
 
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Operating Income. Operating income increased from $57 in the Prior YTD to $70 in the YTD.  The following discussion in this section provides a comparison of operating income by business segment.
   
Two Quarterly Periods Ended
             
   
April 2, 2011
   
April 3, 2010
   
$ Change
   
% Change
 
Operating income (loss):
                       
Rigid Open Top
  $ 54     $ 49     $ 5       10 %
Rigid Closed Top
    38       33       5       15 %
Specialty Films
    (8 )     (23 )     15       65 %
Tapes, Bags and Coatings
    (14 )     (2 )     (12 )     (600 %)
Total operating income
  $ 70     $ 57     $ 13       23 %

Operating income for the Rigid Open Top business increased from $49 in the Prior YTD to $54 in the YTD.  This increase is primarily attributed to acquisition volume growth attributed to Superfos and improved operating performance in manufacturing.  Operating income for the Rigid Closed Top business increased from $33 in the Prior YTD to $38 in the YTD.  This increase is primarily attributed to improved operating performance in manufacturing.  Operating loss for the Specialty Films business improved from an operating loss of $23 in the Prior YTD to an operating loss of $8 in the YTD.  This improvement is primarily attributable to Pliant transaction costs incurred in the Prior YTD. Operating loss for the Tapes, Bags and Coatings business increased from $2 in the Prior YTD to $14 in the YTD primarily attributed to non-cash asset impairment charges related to closed facilities.

Loss on Extinguishment of Debt. Loss on extinguishment of $68 in the YTD is primarily attributed to write-off of deferred financing fees, debt discount and the premiums paid related to the debt extinguishment of the Company’s 8⅞% Second Priority Senior Secured Notes.

Other Income. Other income decreased from $7 in the Prior YTD to $2 in the YTD attributed to the expiration of our 2007 Swap in November 2010.

Interest Expense.  Interest expense increased from $142 in the Prior YTD to $160 in the YTD primarily as a result of increased borrowings to finance the acquisitions of Pliant and Superfos.

Interest Income.  Interest income increased from $35 in the Prior YTD to $48 in the YTD primarily attributed to the non-cash interest and accretion income from our investments in Berry Group’s senior unsecured term loan.

Income Tax Benefit.  For the YTD, we recorded an income tax benefit of $37 or an effective tax rate of 34% compared to an income tax benefit of $10 or an effective tax rate of 23% in the Prior YTD.  The change in our effective tax rate primarily relates to the non-deductibility of certain acquisition costs in the Prior YTD.

Net Loss.  Net loss increased from $33 in the Prior YTD to $71 in the YTD for the reasons discussed above.

Liquidity and Capital Resources

Senior Secured Credit Facility
The Company’s senior secured credit facilities consist of $1,200 term loan and $482 asset based revolving line of credit, net of defaulting lenders.  The availability under the revolving line of credit is the lesser of $482 or based on a defined borrowing base which is calculated based on available accounts receivable and inventory.  The term loan matures in April 2015 and the revolving line of credit matures in April 2013.  The revolving line of credit allows up to $100 of letters of credit to be issued instead of borrowings under the revolving line of credit.  At April 2, 2011, the Company had $126 of cash and no outstanding balance on the revolving credit facility providing unused borrowing capacity of $445 under the revolving line of credit subject to the solvency of our lenders to fund their obligations and our borrowing base calculations.

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 April 2, 2011, the Company had unused borrowing capacity of $445 under the revolving credit facility subject to a borrowing base and thus was not subject to the minimum fixed charge coverage ratio covenant.  Our fixed charge ratio as of April 2, 2011 was 1.3 to 1.0.

 
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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 3.3 to 1.0 as of April 2, 2011.

A key financial metric utilized in the calculation of the first lien leverage ratio is Adjusted EBITDA.  The following table reconciles our Adjusted EBITDA for the twelve months ended April 2, 2011 to net loss.

   
Four Quarters ended
April 2, 2011
   
Four Quarters ended
January 2, 2011
 
Adjusted EBITDA
  $ 629     $ 594  
Net interest expense
    (236 )     (236 )
Depreciation and amortization
    (336 )     (330 )
Income tax benefit
    48       50  
Business optimization expense
    (34 )     (33 )
Restructuring and impairment (a)
    (63 )     (55 )
        8⅞% Second Priority Notes extinguishment (b)
    (68 )     (68 )
Other (c)
    4       5  
Annualization of cost savings
    (50 )     (35 )
              Net loss
  $ (106 )   $ (108 )

Cash flow from operating activities
  $ 181     $ 95  
Cash flow from investing activities
    (205 )     (217 )
Cash flow from financing activities
    127       220  
 
(a)  
Includes $35 and $33 of non-cash asset impairments in four quarters ended April 2011 and January 2011, respectively.
(b)  
Includes $14 of non-cash write off of deferred financing fees, $17 of non-cash write off of debt discount and $37 of premiums paid for extinguishment of debt
(c)  
Includes non-cash income partially offset by $8 of management fees

 
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For comparison purposes, the following table reconciles our Adjusted EBITDA for the quarterly period ended April 2, 2011 and April 3, 2010.

   
Quarterly Period Ended
 
   
April 2, 2011
   
April 3, 2010
 
Adjusted EBITDA
  $ 163     $ 150  
Net interest expense
    (54 )     (54 )
Depreciation and amortization
    (86 )     (80 )
Income tax benefit
          2  
Business optimization expense
    (7 )     (6 )
Restructuring and impairment
    (10 )     (3 )
Other
    (2 )     (1 )
Annualization of cost savings
    (6 )     (12 )
Net loss
  $ (2 )   $ (4 )

Cash flow from operating activities
  $ 63     $ (23 )
Cash flow from investing activities
    (47 )     (59 )
Cash flow from financing activities
    (10 )     84  

While the determination of appropriate adjustments in the calculation of Adjusted EBITDA is subject to interpretation under the terms of our senior secured credit facilities, management believes the adjustments described above are in accordance with the covenants in the senior secured credit facilities.  Adjusted EBITDA should not be considered in isolation or construed as an alternative to our net loss, operating cash flows 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.

Cash Flows
Net cash provided by operating activities increased from $43 in the Prior YTD to $112 in the YTD.  This increase is primarily attributed to improved operating performance and improvements in working capital.

Net cash used for investing activities decreased from $766 in the Prior YTD to $94 in the YTD primarily as a result of the Pliant and Superfos acquisitions in the Prior YTD.  Our capital expenditures are forecasted to be approximately $205 million for fiscal 2011 and will be funded from cash flows from operating activities and existing liquidity.

Net cash provided by financing activities was $736 in the Prior YTD compared to net cash used for financing activities of $40 in the YTD.  The change is primarily attributed to the borrowing of $370 of the 8¼% First Priority Senior Secured Notes and $250 of 8⅞% Second Priority Senior Secured Notes to fund the Pliant acquisition in the Prior YTD and the net cash used for the debt extinguishment of the 8⅞% Second Priority Senior Secured Notes during the YTD.
 
 
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 senior secured 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 October 2, 2010.  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.

 
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Accounts Receivable and Inventory  

   
April 2, 2011
   
October 2, 2010
 
Net Sales (last 12 months)
  $ 4,467     $ 4,257  
Average Accounts Receivable
    479       409  
AR Turnover Rate  (a)
    9.3       10.4  
                 
Cost of Goods Sold (last 12 months)
  $ 3,849     $ 3,667  
Average Inventory
    567       479  
Inventory Turnover Rate  (b)
    6.8       7.7  
 
                  (a) Accounts Receivable Turnover Rate = Revenue for the last twelve months divided by average accounts receivable.
                  (b) Inventory Turnover Rate = Cost of goods sold for the last twelve months divided by average ending inventory.

Critical Accounting Policies

We disclosed those accounting policies that we consider to be significant in determining the amounts to be utilized for communicating our consolidated financial position, results of operations and cash flows in the Form 10-K filed with the SEC for the fiscal year ended October 2, 2010.  Our discussion and analysis of our financial condition and results of operations are based on our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States.  The preparation of financial statements in conformity with these principles requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes.  Actual results are likely to differ from these estimates, but management does not believe such differences will materially affect our financial position or results of operations, although no assurance can be given as to such affect.  The following critical accounting policies have been updated for the period ended April 2, 2011.
 
Goodwill and Other Indefinite Lived Intangible Assets. We are required to perform a review for impairment of goodwill and other indefinite lived intangibles to evaluate whether events and circumstances have occurred that may indicate a potential impairment. Goodwill is considered to be impaired if we determine that the carrying value of the reporting unit exceeds its fair value.  Other indefinite lived intangibles are considered to be impaired if the carrying value excess the fair value.  In addition to the annual review, an interim review is required if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Examples of such events or circumstances could include, but are not limited to: a significant decline in our earnings, a significant decline in the total value of our Company, unanticipated competition or a loss of key personnel.

The following table presents carrying value as of our most recent evaluation for impairment of goodwill compared to Goodwill by reportable segment:

   
Carrying Value as of
   
Goodwill as of
 
   
July 4, 2010
   
April 2, 2011
   
October 2, 2010
 
Rigid Open Top
  $ 1,754     $ 690     $ 691  
Rigid Closed Top
    1,517       774       771  
Specialty Films
    995       240       238  
 
In accordance with our policy, we completed our most recent annual evaluation for impairment of goodwill as of the first day of the fourth fiscal quarter of 2010 and determined that no impairment existed. Our evaluation method included management estimates of cash flow projections based on an internal strategic review and comparable EBITDA multiples of our market peer companies to derive our fair values.  A decline of greater than 10% in the fair value of our segments could result in a potential impairment of goodwill or trademarks depending on revenue or earnings growth, the cost of capital and other factors we utilize to determine our segment and trademark fair values.  Growth by reporting unit varies from year-to-year between segments.  For purposes of these tests, the Rigid Open Top forecasted overall growth ranges between 2% and 5% in the following six years and 3.0% in the terminal year.  The Rigid Closed Top forecasted overall growth ranges between 3% and 8% in the following six years and 3% in the terminal year.  The Specialty Films forecasted overall growth ranges between 2% and 4% in the following six years and 3% in the terminal year.  We assumed that the Company would maintain capital spending sufficient to continue to increase efficiencies in production and have assumed that these efficiencies would be offset by other rising costs in selling, general and administrative expenses.  Given the uncertainty in economic trends, there can be no assurance that when we complete our future annual or other periodic reviews for impairment of goodwill that a material impairment charge will not be recorded. Goodwill and indefinite lived trademarks totaled $1,704 and $220 as of April 2, 2011, respectively.  There were no indicators of impairment during the first two fiscal quarters of 2011.

 
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Based on a critical assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, we believe that our Consolidated Financial Statements provide a meaningful and fair perspective of the Company and its consolidated subsidiaries.  This is not to suggest that other risk factors such as changes in economic conditions, changes in material costs, our ability to pass through changes in material costs, and others could not materially adversely impact our consolidated financial position, results of operations and cash flows in future periods.

Item 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 term loan and (ii) a $500 revolving credit facility.  At April 2, 2011, there was no outstanding balance on the revolving credit facility.  The net outstanding balance of the term loan was $1,152 at April 2, 2011.  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) Credit Suisse’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 $212 bear interest at a rate of LIBOR plus 3.875% per annum, which resets quarterly.

At April 2, 2011, the LIBOR rate of 0.30% 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 and $5, 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.  The Company accounts for the swaps as qualifying cash flow hedges.  The fair value of these interest rate swaps are subject to movements in LIBOR and may fluctuate in future periods.  A .25% change in LIBOR would not have a material impact on the fair value of the interest rate swaps.

 
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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 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% this 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 April 2, 2011.  Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of April 2, 2011, the design and operation of our disclosure controls and procedures were effective at the reasonable assurance level.

 
 (b)
Changes in internal controls.
 
There was no change in our internal control over financial reporting that occurred during the quarter ended April 2, 2011.
 
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 October 2, 2010.

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 2, 2010, 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 2, 2010.

Item 2.           Unregistered Sales of Equity Securities and Use of Proceeds

  Not Applicable

 
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Item 3.            Defaults Upon Senior Securities

  Not Applicable

Item 4.            Submission of Matters to a Vote of Security Holders

   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 Corporation

May 16, 2011


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



 
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