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EX-32.2 - EXH 32.2 SECTION 1350 CERTIFICATION OF THE CHIEF FINANCIAL OFFICER - BERRY GLOBAL GROUP INCexhibit322.htm
EX-32.1 - EXH 32.1 SECTION 1350 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER - BERRY GLOBAL GROUP INCexhibit321.htm
EX-31.2 - EXH 31.2 RULE 13A-14(A)/15D-14(A) CERTIFICATION OF THE CHIEF FINANCIAL OFFICER - BERRY GLOBAL GROUP INCexhibit312.htm
EX-31.1 - EXH 31.1 RULE 13A-14(A)/15D-14(A) CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER - BERRY GLOBAL GROUP INCexhibit311.htm

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 April 1, 2017
Commission File Number 001-35672

 
BERRY GLOBAL GROUP, INC.
 
 A Delaware corporation
 101 Oakley Street, Evansville, Indiana, 47710
(812) 424-2904
 IRS employer identification number
20-5234618
   
BERRY PLASTICS GROUP, INC.
(former name or former address, if changed since last report)


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, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See definitions of " large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):   
 
Large accelerated filer         Accelerated filer       Non-accelerated filer  Smaller reporting company      Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.    Yes      No  

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 May 3, 2017
Common Stock, $.01 par value per share
 
129.5 million shares
 
 

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, or expectations.  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 Global Group, Inc.
Form 10-Q Index
For Quarterly Period Ended April 1, 2017
 
Part I.
Financial Information
Page No.
 
Item 1.
Financial Statements:
 
 
 
Consolidated Statements of Income and Comprehensive Income
 
 
Consolidated Balance Sheets
 
 
Consolidated Statements of Cash Flows
 
 
Notes to Consolidated Financial Statements
 
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
 
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
 
Item 4.
Controls and Procedures
Part II.
Other Information
 
 
Item 1.
Legal Proceedings
 
Item 1A.
Risk Factors
 
Item 6.
Exhibits
 
Signature
 
3

Part I. Financial Information
 
Item 1.
Financial Statements
 
Berry Global Group, Inc.
Consolidated Statements of Income
(Unaudited)
(in millions of dollars, except per share amounts)
 
 
 
Quarterly Period Ended
   
Two Quarterly Periods Ended
 
 
 
April 1, 2017
   
April 2, 2016
   
April 1, 2017
   
April 2, 2016
 
Net sales 
 
$
1,806
   
$
1,614
   
$
3,308
   
$
3,226
 
Costs and expenses:
                               
Cost of goods sold 
   
1,453
     
1,269
     
2,659
     
2,589
 
Selling, general and administrative 
   
132
     
138
     
245
     
292
 
Amortization of intangibles 
   
40
     
35
     
73
     
71
 
Restructuring and impairment charges
   
6
     
7
     
10
     
23
 
Operating income 
   
175
     
165
     
321
     
251
 
Other (income) expense, net 
   
20
     
(7
)
   
19
     
(3
)
Interest expense, net 
   
67
     
74
     
135
     
149
 
Income before income taxes 
   
88
     
98
     
167
     
105
 
Income tax expense 
   
16
     
39
     
44
     
42
 
Consolidated net income
 
$
72
   
$
59
   
$
123
   
$
63
 
 
                               
Net income per share:
                               
Basic 
 
$
0.56
   
$
0.49
   
$
0.98
   
$
0.52
 
Diluted 
   
0.54
     
0.47
     
0.94
     
0.51
 
Outstanding weighted-average shares:
                               
Basic 
   
127.7
     
120.5
     
124.9
     
120.3
 
Diluted 
   
133.2
     
124.4
     
130.7
     
124.0
 
 

Berry Global Group, Inc.
Consolidated Statements of Comprehensive Income
(Unaudited)
(in millions of dollars) 
 
 
 
Quarterly Period Ended
   
Two Quarterly Periods Ended
 
 
 
April 1, 2017
   
April 2, 2016
   
April 1, 2017
   
April 2, 2016
 
Consolidated net income
 
$
72
   
$
59
   
$
123
   
$
63
 
Currency translation 
   
21
     
84
     
(24
)
   
55
 
Defined benefit pension and retiree health benefit plans
   
13
     
     
13
     
 
Interest rate hedges 
   
15
     
(19
)
   
33
     
(15
)
Provision for income taxes related to other comprehensive
 income items
   
(6
)
   
7
     
(13
)
   
6
 
Other comprehensive income, net of tax
   
43
     
72
     
9
     
46
 
Comprehensive income 
 
$
115
   
$
131
   
$
132
   
$
109
 
 
See notes to consolidated financial statements.

4

Berry Global Group, Inc.
Consolidated Balance Sheets
(in millions of dollars)
 
 
 
April 1, 2017
   
October 1, 2016
 
Assets
 
(Unaudited)
       
             
Current assets:
           
Cash and cash equivalents 
 
$
293
   
$
323
 
Accounts receivable (less allowance of $13 and $8, respectively)
   
799
     
704
 
Inventories:
               
Finished goods 
   
475
     
397
 
Raw materials and supplies 
   
327
     
263
 
 
   
802
     
660
 
Prepaid expenses and other current assets 
   
102
     
105
 
Total current assets 
   
1,996
     
1,792
 
Property, plant, and equipment, net 
   
2,392
     
2,224
 
Goodwill and intangible assets, net
   
4,102
     
3,606
 
Other assets 
   
51
     
31
 
Total assets 
 
$
8,541
   
$
7,653
 
                 
Liabilities
               
                 
Current liabilities:
               
Accounts payable 
 
$
578
   
$
539
 
Accrued expenses and other current liabilities 
   
494
     
449
 
Current portion of long-term debt 
   
36
     
43
 
Total current liabilities 
   
1,108
     
1,031
 
Long-term debt, less current portion 
   
6,012
     
5,712
 
Deferred income taxes 
   
404
     
272
 
Other long-term liabilities 
   
315
     
417
 
Total liabilities 
   
7,839
     
7,432
 
                 
Stockholders' equity
               
 
               
Common stock (129.5 and 122.0 million shares issued, respectively)
   
1
     
1
 
Additional paid-in capital 
   
798
     
449
 
Non-controlling interest 
   
3
     
3
 
Accumulated equity (deficit) 
   
39
     
(84
)
Accumulated other comprehensive loss 
   
(139
)
   
(148
)
Total stockholders' equity
   
702
     
221
 
Total liabilities and stockholders' equity
 
$
8,541
   
$
7,653
 
 
See notes to consolidated financial statements.

5

Berry Global Group, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(in millions of dollars)
 
 
 
Two Quarterly Periods Ended
 
 
 
April 1, 2017
   
April 2, 2016
 
Cash Flows from Operating Activities:
           
Net income
 
$
123
   
$
63
 
Adjustments to reconcile net cash provided by operating activities:
               
Depreciation 
   
178
     
199
 
Amortization of intangibles 
   
73
     
71
 
Non-cash interest expense 
   
4
     
5
 
Deferred income tax 
   
12
     
21
 
Stock compensation expense 
   
11
     
14
 
Other non-cash operating activities, net 
   
24
     
6
 
Changes in working capital 
   
(90
)
   
(19
)
Changes in other assets and liabilities 
   
(2
)
   
1
 
Net cash from operating activities 
   
333
     
361
 
                 
Cash Flows from Investing Activities:
               
Additions to property, plant and equipment 
   
(135
)
   
(173
)
Proceeds from sale of assets 
   
4
     
4
 
Acquisition of business, net of cash acquired
   
(458
)
   
(2,283
)
Other investing activities, net
   
(1
)
   
 
Net cash from investing activities
   
(590
)
   
(2,452
)
                 
Cash Flows from Financing Activities:
               
Proceeds from long-term borrowings 
   
595
     
2,490
 
Repayments on long-term borrowings 
   
(317
)
   
(267
)
Proceeds from issuance of common stock 
   
15
     
11
 
Payment of tax receivable agreement 
   
(60
)
   
(57
)
Debt financing costs 
   
(4
)
   
(37
)
Purchase of non-controlling interest 
   
     
(66
)
Net cash from financing activities 
   
229
     
2,074
 
Effect of exchange rate changes on cash 
   
(2
)
   
1
 
Net change in cash 
   
(30
)
   
(16
)
Cash and cash equivalents at beginning of period 
   
323
     
228
 
Cash and cash equivalents at end of period 
 
$
293
   
$
212
 
 
See notes to consolidated financial statements.


6

Berry Global 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 Global Group, Inc. ("the Company," "we," 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.

Effective April 13, 2017, the Company changed its name from Berry Plastics Group, Inc. to Berry Global Group, Inc.  The new name is reflected throughout this Form 10-Q.  Common Shares of the Company stock continue to be traded on the New York Stock Exchange under the symbol BERY.  In addition, Berry Plastics Corporation, a wholly owned subsidiary, has changed its name to Berry Global, Inc.
 
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 2017, with the exception of the below, there have been no developments to the recently adopted accounting pronouncements from those disclosed in the Company's 2016 Annual Report on Form 10-K that are considered to have a material impact on our unaudited consolidated financial statements.

Goodwill

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment.  To simplify the subsequent measurement of goodwill, Step 2, which was previously used to compute the implied fair value of goodwill, was eliminated.  This update requires an entity to perform its annual goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.  An impairment will be recognized in the amount by which a reporting unit's carrying amount exceeds its fair value.  The loss recognized will not exceed the total amount of goodwill allocated to that reporting unit.  The new guidance is effective for interim and annual periods beginning after December 15, 2019 and should be applied on a prospective basis.  Early adoption is permitted.  The Company does not expect a significant impact as a result of this change.  We will adopt this guidance for our fiscal 2017 goodwill testing.

Retirement Benefits

In March 2017, the FASB issued ASU 2017-07, Compensation – Retirement Benefits (Topic 715), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which requires employers to report the service cost component in the same line item as other compensation costs arising from services rendered by the pertinent employees during the period.  The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. If a separate line item is used to present the other components of net benefit cost, then the line item used in the income statement to present the other components of net benefit cost must be disclosed.  The new guidance is effective for interim and annual periods beginning after December 15, 2017 and should be applied on a retrospective basis.  Early adoption is permitted.  The Company is currently evaluating the impact of this guidance.

3.
Acquisitions
 
AEP Industries Inc.

In January 2017, the Company acquired AEP Industries Inc. ("AEP") for a purchase price of $786 million, net of cash acquired.  A portion of the purchase price consisted of issuing 6.5 million of Berry common shares which were valued at $328 million at the time of closing.  AEP manufactures and markets an extensive and diverse line of polyethylene and polyvinyl chloride flexible plastic packaging products with consumer, industrial, and agricultural applications.  The acquired business is operated in our Engineered Materials segment.  To finance the purchase, the Company entered into an incremental assumption agreement to increase the commitments under the Company's existing term loan credit agreement by $500 million due 2024.
7

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 AEP have been included in the consolidated results of the Company since the date of the acquisition.  The Company has not finalized the allocation of the purchase price to the fair value of the assets acquired and liabilities assumed.  The Company has recognized Goodwill on this transaction primarily as a result of expected cost synergies, and does not expect Goodwill to be deductible for tax purposes.  The following table summarizes the 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)
 
$
129
 
Property and equipment
   
222
 
Intangible assets
   
269
 
Goodwill
   
307
 
Historical AEP debt assumed
   
(7
)
Other assets and long-term liabilities
   
(134
)
(a) Includes a $5 million step up of inventory to fair value
 

Unaudited pro forma net sales were $1.9 billion and $3.6 billion for the quarterly period and two quarterly periods ended April 1, 2017, respectively, and $1.9 billion and $3.8 billion for the quarterly period and two quarterly periods ended April 2, 2016, respectively.  Unaudited pro forma net income was $74 million and $125 million for the quarterly period and two quarterly periods ended April 1, 2017, respectively, and $70 million and $73 million for the quarterly period and two quarterly periods ended April 2, 2016, respectively.  The unaudited pro forma net sales and net income assume that the AEP acquisition had occurred as of the beginning of the period.

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 cash acquired.  Avintiv was one of the world's leading developers, producers, and marketers of nonwoven specialty materials used in hygiene, infection prevention, personal care, industrial, construction, and filtration applications.  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 results of Avintiv have been included in the consolidated results of the Company since the date of acquisition.

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:
 
 
 
April 1, 2017
   
October 1, 2016
 
Trade receivables sold to financial institutions
 
$
26
   
$
23
 
Net amounts advanced from financial institutions
   
(24
)
   
(18
)
Amounts due from financial institutions
 
$
2
   
$
5
 
 
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 April 1, 2017.  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:
 
8

 
 
 
Quarterly Period Ended
   
Two Quarterly Periods Ended
 
   
April 1, 2017
   
April 2, 2016
   
April 1, 2017
   
April 2, 2016
 
Consumer Packaging 
 
$
2
   
$
2
   
$
4
   
$
5
 
Health, Hygiene & Specialties 
   
2
     
4
     
4
     
16
 
Engineered Materials 
   
2
     
1
     
2
     
2
 
Consolidated 
 
$
6
   
$
7
   
$
10
   
$
23
 
 
The table below sets forth the activity with respect to the restructuring accrual at April 1, 2017:
 
 
 
Severance and
termination benefits
   
Facilities exit
costs and other
   
Non-cash charges
   
Total
 
Balance at October 1, 2016
 
$
7
   
$
6
   
$
   
$
13
 
Charges 
   
7
     
3
     
     
10
 
Non-cash asset impairment 
   
     
     
     
 
Cash payments 
   
(9
)
   
(4
)
   
     
(13
)
Balance at April 1, 2017
 
$
5
   
$
5
   
$
   
$
10
 
 
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:
 
 
 
April 1, 2017
   
October 1, 2016
 
Employee compensation, payroll and other
 
$
122
   
$
152
 
Interest 
   
36
     
53
 
Rebates 
   
50
     
54
 
Restructuring 
   
10
     
13
 
Accrued taxes 
   
65
     
40
 
Tax receivable agreement obligation
   
103
     
60
 
Accrued operating expenses 
   
108
     
77
 
 
 
$
494
   
$
449
 
 
The following table sets forth the totals included in Other long-term liabilities on the Consolidated Balance Sheets:
 
 
 
April 1, 2017
   
October 1, 2016
 
Lease retirement obligation 
 
$
36
   
$
34
 
Sale-lease back deferred gain
   
25
     
26
 
Pension liability 
   
85
     
88
 
Deferred purchase price 
   
44
     
41
 
Tax receivable agreement obligation
   
20
     
114
 
Interest rate swaps 
   
35
     
45
 
Other 
   
70
     
69
 
 
 
$
315
   
$
417
 
 
The Company made $60 million of payments related to the income tax receivable agreement ("TRA") in the December 31, 2016 quarter, of which Apollo Global Management, LLC received $48 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.

9

7.  Long-Term Debt
 
Long-term debt consists of the following:
 
  Maturity Date   April 1, 2017      October 1, 2016   
Term loan 
February 2020
 
$
1,148
   
$
1,351
 
Term loan 
January 2021
   
814
     
814
 
Term loan 
October 2022
   
1,795
     
1,895
 
Term loan
January 2024
   
500
     
 
Revolving line of credit 
May 2020
   
100
     
 
5 1/8% Second Priority Senior Secured Notes
July 2023
   
700
     
700
 
5 1/2% Second Priority Senior Secured Notes
May 2022
   
500
     
500
 
6% Second Priority Senior Secured Notes
October 2022
   
400
     
400
 
Debt discounts and deferred fees 
     
(55
)
   
(58
)
Capital leases and other 
Various
   
146
     
153
 
Total long-term debt 
 
   
6,048
     
5,755
 
Current portion of long-term debt 
 
   
(36
)
   
(43
)
Long-term debt, less current portion
 
 
$
6,012
   
$
5,712
 
 
 
The Company was in compliance with all covenants as of April 1, 2017.

Debt discounts and deferred financing fees are presented net of Lonterm debt, less the current portion on the Consolidated Balance Sheets and are amortized to Interest expense through maturity.

Term Loans

In January 2017, the Company entered into an incremental assumption agreement to increase the commitments under the existing term loan credit agreement by $500 million in order to finance the AEP acquisition.  The incremental assumption agreement provided for the $500 million incremental term loan to bear interest at LIBOR plus 2.50% per annum with no LIBOR floor, to mature in January 2024 and to be subject to customary amortization.  During the quarter the Company executed an amendment to lower the interest rates under certain of the term loans.  The term loans maturing in October 2022 now bear interest at LIBOR plus 2.50% with no LIBOR floor.  The term loans maturing in February 2020 and January 2021 now bear interest at LIBOR plus 2.25% with no LIBOR floor.
During fiscal 2017, the Company has made $317 million of repayments on long-term borrowings using existing liquidity and the revolving line of credit.
As a result of the current year prepayments and modifications, the Company recorded a $2 million loss on debt extinguishment in Other (income) expense, net, 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.  Additionally, the Company recognized $9 million of debt discounts and deferred financing fees related to the incremental assumption agreements and amendments.
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. 

The Company designates derivative instruments that qualify as hedging instruments, 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, which is evaluated quarterly, 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. 
 
The Company records the changes in the fair value of derivatives that are not designated as hedging instruments to the Consolidated Statements of Income.

Foreign Currency Forward Contracts
 
The primary purpose of the Company's foreign currency hedging activities is to manage the potential changes in value associated with the changes in foreign currencies on future foreign cash movements for certain jurisdictions.  The changes in fair value of these derivative contracts are recognized in Other (income) expense, net on the Consolidated Statements of Income and are largely offset by the remeasurement of the underlying intercompany loan.  When valuing foreign currency forward contracts the Company utilizes Level 2 (significant observable inputs) fair value measurements.  These contracts are typically entered into and settled within the given quarterly reporting period.

10

Interest Rate Swaps - Cash Flow Hedges

The primary purpose of our interest rate swaps is to manage cash flow variability associated with our outstanding variable rate term loan debt.  At inception these contracts are designed as effective cash flow hedges.  When valuing interest rate swaps we utilize derivative Level 2 (significant observable inputs) fair value measurements.  For interest rate swaps that are designated and qualify as cash flow hedges, the effective portion of the gain or loss is reported as a component of Accumulated other comprehensive loss.
 
Cash flow hedge accounting is discontinued when it is determined that an interest rate swap no longer qualifies as an effective hedge.  When cash flow hedge accounting is de-designated, the swap is subject to the mark-to-market method of accounting prospectively.  Changes in the mark-to-market fair value of the de-designated instrument are recorded to the Consolidated Statements of Income. Unrealized gains and losses that were previously deferred in Accumulated other comprehensive loss are amortized to Interest expense over the remaining term of the swap.

Active Interest Rate Swap Arrangements

In February 2013, the Company entered into a $1 billion interest rate swap transaction with an effective date of May 2016 and expiration in May 2019.  In June 2013, the Company elected to settle this derivative instrument and received $16 million as a result of this settlement.  The offset is included in Accumulated other comprehensive loss and 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 a $1 billion interest rate swap transaction with an effective date of February 2016 and expiration in February 2019.  In February 2017, in conjunction with the term loan modifications, the Company discontinued hedge accounting.  Previously unrealized losses in Accumulated other comprehensive loss are being amortized to Interest expense through February 2019, the original term of the swap.  In order to offset the impact of future fair value changes of the March 2014 de-designated swap, the Company entered into a mirrored offsetting swap in February 2017 and has not designated it as a hedge.
 
In September 2015, the Company entered into a $1 billion interest rate swap transaction with an effective date of December 2015 and expiration in June 2019.  In February 2017, in conjunction with the term loan modifications, the Company entered into an agreement to modify the terms of the original swap on a prospective basis.  At that time, the Company de-designated the hedge and has re-designated the modified swap as an effective cash flow hedge.  The amount included in Accumulated other comprehensive loss at the date of de-designation is being amortized to Interest expense through June 2019, the original term of the swap.  The modified agreement swaps a one-month variable LIBOR contract for a fixed annual rate of 1.5190% with an effective date in March 2017 and expiration in June 2019.

In January 2017, the Company entered into a $450 million interest rate swap transaction that swaps a one-month variable LIBOR contract for a fixed annual rate of 2.00%, with an effective date in May 2017 and expiration in May 2022.  

In February 2017, the Company entered into a $1 billion interest rate swap transaction that swaps a one-month variable LIBOR contract for a fixed annual rate of 2.3785% with an effective date in February 2017 and expiration in February 2019.

The Company records the fair value positions of all derivative financial instruments on a net basis by counterparty for which a master netting arrangement is utilized. Balances as of the current period are as follows;
 
Derivatives Instruments
Hedge Designation
Balance Sheet Location
 
April 1, 2017
   
October 1, 2016
 
Foreign currency forward contracts
Not designated
Other assets
 
$
4
   
$
3
 
Interest rate swaps
Not designated
Other assets
   
18
     
 
Interest rate swaps
Designated
Other long-term liabilities
   
17
     
48
 
Interest rate swaps
Not designated
Other long-term liabilities
   
18
     
 
 
The effect of the Company's derivative instruments on the Consolidated Statements of Income is as follows:
 
 
   
Quarterly Period Ended
 
Two Quarterly Periods Ended
 
Derivatives instruments
Statements of Income Location
April 1, 2017
 
April 2, 2016
 
April 1, 2017
 
April 2, 2016
 
Interest rate swaps 
Interest expense, net
 
$
3
   
$
4
   
$
8
   
$
4
 
Foreign currency forward contracts 
Other (income) expense, net
 
$
1
   
$
7
   
$
2
   
$
6
 
 
The amortization related to unrealized losses in Accumulated other comprehensive loss is expected to be approximately $7 million in the next 12 months.

11

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 2016 assessment.  No impairment indicators were identified in the current quarter.

Included in the following table are the major categories of assets measured at fair value on a non-recurring basis as of April 1, 2017 and October 1, 2016, along with the impairment loss recognized on the fair value measurement during the period:
 
 
 
As of April 1, 2017
 
 
 
Level 1
   
Level 2
   
Level 3
   
Total
   
Impairment
 
Indefinite-lived trademarks
 
$
   
$
   
$
248
   
$
248
   
$
 
Goodwill 
   
     
     
2,706
     
2,706
     
 
Definite lived intangible assets
   
     
     
1,148
     
1,148
     
 
Property, plant, and equipment
   
     
     
2,392
     
2,392
     
 
Total 
 
$
   
$
   
$
6,494
   
$
6,494
   
$
 
 
 
 
As of October 1, 2016
 
 
 
Level 1
   
Level 2
   
Level 3
   
Total
   
Impairment
 
Indefinite-lived trademarks
 
$
   
$
   
$
248
   
$
248
   
$
 
Goodwill 
   
     
     
2,406
     
2,406
     
 
Definite lived intangible assets
   
     
     
952
     
952
     
 
Property, plant, and equipment
   
     
     
2,224
     
2,224
     
3
 
Total 
 
$
   
$
   
$
5,830
   
$
5,830
   
$
3
 
 
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 $68 million as of April 1, 2017.  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 18% and 40% for the quarterly period ended April 1, 2017 and April 2, 2016, respectively.  Within the quarter, the effective tax rate was favorably impacted primarily by the discrete items related to share based compensation excess tax benefit of 12% and state valuation allowance release of 10%, partially offset by other discrete items.

10.    Operating Segments
 
The Company's operations are organized into three operating segments: Consumer Packaging, Health, Hygiene & Specialties, and Engineered Materials.  The structure is designed to align us with our customers, provide improved service, and drive future growth in a cost efficient manner.  In October 2016, the Company realigned portions of our operating segments in order to leverage geographic management teams and commercial activities.  The international portion of our Retail & Industrial product line was moved from Engineered Materials to the Specialties product line within Health, Hygiene & Specialties, resulting in a $33 million and $69 million movement in Net sales in the quarterly and two quarterly periods ended April 2, 2016, respectively.  Additionally, to align the newly acquired AEP business with our existing Core Films business, $78 million and $156 million of Net sales were moved from Consumer Packaging to Engineered Materials in the quarterly and two quarterly periods ended April 2, 2016, respectively.  As result of these organizational realignments, we have recast prior period segment amounts.  Selected information by reportable segment is presented in the following tables:
12


   
Quarterly Period Ended
   
Two Quarterly Periods Ended
 
 
 
April 1, 2017
   
April 2, 2016
   
April 1, 2017
   
April 2, 2016
 
Net sales:
                       
Consumer Packaging 
 
$
589
   
$
610
   
$
1,138
   
$
1,214
 
Health, Hygiene & Specialties 
   
597
     
601
     
1,167
     
1,201
 
Engineered Materials 
   
620
     
403
     
1,003
     
811
 
Total net sales 
 
$
1,806
   
$
1,614
   
$
3,308
   
$
3,226
 
Operating income:
                               
Consumer Packaging 
 
$
56
   
$
59
   
$
90
   
$
98
 
Health, Hygiene & Specialties 
   
52
     
58
     
111
     
71
 
Engineered Materials 
   
67
     
48
     
120
     
82
 
Total operating income
 
$
175
   
$
165
   
$
321
   
$
251
 
Depreciation and amortization:
                               
Consumer Packaging 
 
$
59
   
$
60
   
$
118
   
$
122
 
Health, Hygiene & Specialties 
   
46
     
50
     
90
     
105
 
Engineered Materials 
   
26
     
21
     
43
     
43
 
 Total depreciation and amortization
 
$
131
   
$
131
   
$
251
   
$
270
 


 
 
April 1, 2017
   
October 1, 2016
 
Total assets:
           
Consumer Packaging 
 
$
3,259
   
$
3,315
 
Health, Hygiene & Specialties 
   
3,448
     
3,504
 
Engineered Materials 
   
1,834
     
834
 
Total assets 
 
$
8,541
   
$
7,653
 
 
Selected information by geography is presented in the following tables:
 
 
Quarterly Period Ended
 
Two Quarterly Periods Ended
 
 
April 1, 2017
 
April 2, 2016
 
April 1, 2017
 
April 2, 2016
 
Net sales:
               
North America
 
$
1,500
   
$
1,303
   
$
2,704
   
$
2,610
 
South America
   
81
     
80
     
161
     
159
 
Europe
   
162
     
174
     
311
     
339
 
Asia
   
63
     
57
     
132
     
118
 
Total net sales
 
$
1,806
   
$
1,614
   
$
3,308
   
$
3,226
 
 

 
 
April 1, 2017
   
October 1, 2016
 
Long-lived assets:
           
North America 
 
$
5,443
   
$
4,724
 
South America 
   
383
     
386
 
Europe 
   
434
     
462
 
Asia 
   
285
     
289
 
Total Long-lived assets
 
$
6,545
   
$
5,861
 

Selected information by product line is presented in the following tables:

 
 
Quarterly Period Ended
   
Two Quarterly Periods Ended
 
(in percentages)
 
April 1, 2017
   
April 2, 2016
   
April 1, 2017
   
April 2, 2016
 
Net sales:
                       
Rigid Open Top
   
40
%
   
41
%
   
41
%
   
41
%
Rigid Closed Top
   
60
     
59
     
59
     
59
 
Consumer Packaging
   
100
%
   
100
%
   
100
%
   
100
%
                                 
Health
   
22
%
   
19
%
   
21
%
   
19
%
Hygiene
   
43
     
45
     
44
     
45
 
Specialties
   
35
     
36
     
35
     
36
 
Health, Hygiene & Specialties
   
100
%
   
100
%
   
100
%
   
100
%
                                 
Core Films
   
46
%
   
71
%
   
57
%
   
71
%
Retail & Industrial
   
54
     
29
     
43
     
29
 
Engineered Materials
   
100
%
   
100
%
   
100
%
   
100
%

13

Goodwill  
 
In connection with the change in reporting segments, the Company reallocated goodwill to the segments under the provisions of ASC 350.  The changes in the carrying amount of goodwill by reportable segment are as follows:  
 
 
 
Consumer
Packaging
   
Health, Hygiene
& Specialties
   
Engineered
Materials
   
Total
 
Balance as of October 1, 2016
 
$
1,520
   
$
801
   
$
85
   
$
2,406
 
Segment reorganization
   
(110
)
   
7
     
103
     
 
Acquisition, net
   
     
     
307
     
307
 
Foreign currency translation adjustment
   
(1
)
   
(6
)
   
     
(7
)
Balance as of April 1, 2017
 
$
1,409
   
$
802
   
$
495
   
$
2,706
 
 
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.  Shares excluded from the calculation as the effect of their conversion into shares of our common stock would be antidilutive were 1.1 million for the six months ended April 1, 2017.
 
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
   
Two Quarterly Periods Ended
 
(in millions, except per share amounts)
 
April 1, 2017
   
April 2, 2016
   
April 1, 2017
   
April 2, 2016
 
Numerator
                       
Consolidated net income
 
$
72
   
$
59
   
$
123
   
$
63
 
Denominator
                               
Weighted average common shares outstanding - basic
   
127.7
     
120.5
     
124.9
     
120.3
 
Dilutive shares
   
5.5
     
3.9
     
5.8
     
3.7
 
Weighted average common and common equivalent shares outstanding - diluted
   
133.2
     
124.4
     
130.7
     
124.0
 
                                 
Per common share income
                               
Basic
 
$
0.56
   
$
0.49
   
$
0.98
   
$
0.52
 
Diluted
 
$
0.54
   
$
0.47
   
$
0.94
   
$
0.51
 
 

14

13.  Accumulated Other Comprehensive Income (Loss)
 
The components and activity of Accumulated other comprehensive income (loss) are as follows: 
 
   
Currency Translation
   
Defined Benefit Pension and Retiree Health Benefit Plans
   
Interest Rate Swaps Designated as Hedges
   
Interest Rate Swaps Not Designated as Hedges
   
Accumulated Other
Comprehensive
Income (Loss)
 
Balance at October 1, 2016 
 
$
(82
)
 
$
(44
)
 
$
(31
)
 
$
9
   
$
(148
)
De-designated hedges
   
     
     
20
     
(20
)
   
 
Other comprehensive income (loss) before reclassifications 
   
(24
)
   
13
     
25
     
     
14
 
Net amount reclassified from accumulated other comprehensive income (loss)  
   
     
     
7
     
1
     
8
 
Provision for income taxes related to other comprehensive income items
   
     
     
(12
)
   
(1
)
   
(13
)
Balance at April 1, 2017
 
$
(106
)
 
$
(31
)
 
$
9
   
$
(11
)
 
$
(139
)
 
   
Currency Translation
   
Defined Benefit Pension and Retiree Health Benefit Plans
   
Interest Rate Swaps Designated as Hedges
   
Interest Rate Swaps Not Designated as Hedges
   
Accumulated Other
Comprehensive
Income (Loss)
 
Balance at September 26, 2015 
 
$
(81
)
 
$
(25
)
 
$
(23
)
 
$
10
   
$
(129
)
Other comprehensive income (loss) before reclassifications 
   
55
     
     
(19
)
   
     
36
 
Net amount reclassified from accumulated other comprehensive income (loss)  
   
     
     
4
     
     
4
 
Provision for income taxes related to other comprehensive income items
   
     
     
6
     
     
6
 
Balance at April 2, 2016
 
$
(26
)
 
$
(25
)
 
$
(32
)
 
$
10
   
$
(83
)

14. 
Guarantor and Non-Guarantor Financial Information
 
Berry Global, Inc. ("Issuer") has notes outstanding which are fully, jointly, severally, and unconditionally guaranteed by its parent, Berry Global Group, Inc. (for purposes of this Note, "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 any 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, certain immaterial domestic 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.

Condensed Supplemental Consolidated Balance Sheet

 
 
April 1, 2017
 
 
 
Parent
   
Issuer
   
Guarantor
Subsidiaries
   
Non-
Guarantor
Subsidiaries
   
Eliminations
   
Total
 
Current assets
 
$
   
$
77
   
$
1,191
   
$
728
   
$
   
$
1,996
 
Intercompany receivable
   
462
     
2,730
     
     
     
(3,192
)
   
 
Property, plant, and equipment, net
   
     
75
     
1,611
     
706
     
     
2,392
 
Other assets
   
770
     
5,037
     
4,629
     
520
     
(6,803
)
   
4,153
 
Total assets
 
$
1,232
   
$
7,919
   
$
7,431
   
$
1,954
   
$
(9,995
)
 
$
8,541
 
 
                                               
Current liabilities
 
$
106
   
$
143
   
$
581
   
$
278
   
$
   
$
1,108
 
Intercompany payable
   
     
67
     
2,973
     
152
     
(3,192
)
   
 
Other long-term liabilities
   
424
     
6,133
     
107
     
67
     
     
6,731
 
Stockholders' equity (deficit)
   
702
     
1,576
     
3,770
     
1,457
     
(6,803
)
   
702
 
Total liabilities and stockholders' equity (deficit)
 
$
1,232
   
$
7,919
   
$
7,431
   
$
1,954
   
$
(9,995
)
 
$
8,541
 

15

 
 
October 1, 2016
 
 
 
Parent
   
Issuer
   
Guarantor
Subsidiaries
   
Non-
Guarantor
Subsidiaries
   
Eliminations
   
Total
 
Current assets
 
$
   
$
161
   
$
945
   
$
686
   
$
   
$
1,792
 
Intercompany receivable
   
364
     
2,797
     
     
     
(3,161
)
   
 
Property, plant and equipment, net
   
     
76
     
1,434
     
714
     
     
2,224
 
 Other assets
   
302
     
4,101
     
4,094
     
557
     
(5,417
)
   
3,637
 
 Total assets
 
$
666
   
$
7,135
   
$
6,473
   
$
1,957
   
$
(8,578
)
 
$
7,653
 
 
                                               
Current liabilities
 
$
60
   
$
207
   
$
480
   
$
284
   
$
   
$
1,031
 
Intercompany payable
   
     
     
2,992
     
169
     
(3,161
)
   
 
Other long-term liabilities
   
385
     
5,822
     
126
     
68
     
     
6,401
 
Stockholders' equity (deficit)
   
221
     
1,106
     
2,875
     
1,436
     
(5,417
)
   
221
 
Total liabilities and stockholders' equity (deficit)
 
$
666
   
$
7,135
   
$
6,473
   
$
1,957
   
$
(8,578
)
 
$
7,653
 

Condensed Supplemental Consolidated Statements of Income
 
 
 
Quarterly Period Ended April 1, 2017
 
 
 
Parent
   
Issuer
   
Guarantor
Subsidiaries
   
Non-
Guarantor
Subsidiaries
   
Eliminations
   
Total
 
Net sales
 
$
   
$
146
   
$
1,252
   
$
408
   
$
   
$
1,806
 
Cost of goods sold
   
     
117
     
1,012
     
324
     
     
1,453
 
Selling, general and administrative
   
     
(11
)
   
87
     
56
     
     
132
 
Amortization of intangibles
   
     
1
     
31
     
8
     
     
40
 
Restructuring and impairment charges
   
     
     
6
     
     
     
6
 
Operating income
   
     
39
     
116
     
20
     
     
175
 
Other expense (income), net
   
     
10
     
2
     
8
     
     
20
 
Interest expense, net
   
     
6
     
46
     
15
     
     
67
 
Equity in net income of subsidiaries
   
(88
)
   
(51
)
   
     
     
139
     
 
Income (loss) before income taxes
   
88
     
74
     
68
     
(3
)
   
(139
)
   
88
 
Income tax expense (benefit)
   
16
     
2
     
     
14
     
(16
)
   
16
 
Consolidated net income (loss)
 
$
72
   
$
72
   
$
68
   
$
(17
)
 
$
(123
)
 
$
72
 
Comprehensive net income (loss)
 
$
72
   
$
81
   
$
68
   
$
17
   
$
(123
)
 
$
115
 

 
 
Quarterly Period Ended April 2, 2016
 
 
 
Parent
   
Issuer
   
Guarantor
Subsidiaries
   
Non-
Guarantor
Subsidiaries
   
Eliminations
   
Total
 
Net sales
 
$
   
$
142
   
$
1,070
   
$
402
   
$
   
$
1,614
 
Cost of goods sold
   
     
110
     
841
     
318
     
     
1,269
 
Selling, general and administrative
   
     
27
     
83
     
28
     
     
138
 
Amortization of intangibles
   
     
2
     
24
     
9
     
     
35
 
Restructuring and impairment charges
   
     
     
6
     
1
     
     
7
 
Operating income
   
     
3
     
116
     
46
     
     
165
 
Other expense (income), net
   
     
12
     
(3
)
   
(16
)
   
     
(7
)
Interest expense, net
   
     
9
     
49
     
16
     
     
74
 
Equity in net income of subsidiaries
   
(98
)
   
(104
)
   
     
     
202
     
 
Income (loss) before income taxes
   
98
     
86
     
70
     
46
     
(202
)
   
98
 
Income tax expense (benefit)
   
39
     
27
     
1
     
11
     
(39
)
   
39
 
Consolidated net income (loss)
 
$
59
   
$
59
   
$
69
   
$
35
   
$
(163
)
 
$
59
 
Comprehensive net income (loss)
 
$
59
   
$
47
   
$
69
   
$
119
   
$
(163
)
 
$
131
 

16


 
 
Two Quarterly Periods Ended April 1, 2017
 
 
 
Parent
   
Issuer
   
Guarantor
Subsidiaries
   
Non-
Guarantor
Subsidiaries
   
Eliminations
   
Total
 
Net sales
 
$
   
$
289
   
$
2,231
   
$
788
   
$
   
$
3,308
 
Cost of goods sold
   
     
233
     
1,801
     
625
     
     
2,659
 
Selling, general and administrative
   
     
31
     
162
     
52
     
     
245
 
Amortization of intangibles
   
     
3
     
56
     
14
     
     
73
 
Restructuring and impairment charges
   
     
     
10
     
     
     
10
 
Operating income
   
     
22
     
202
     
97
     
     
321
 
Other expense (income), net
   
     
14
     
2
     
3
     
     
19
 
Interest expense, net
   
     
12
     
91
     
32
     
     
135
 
Equity in net income of subsidiaries
   
(167
)
   
(143
)
   
     
     
310
     
 
Income (loss) before income taxes
   
167
     
139
     
109
     
62
     
(310
)
   
167
 
Income tax expense (benefit)
   
44
     
16
     
     
28
     
(44
)
   
44
 
Consolidated net income (loss)
 
$
123
   
$
123
   
$
109
   
$
34
   
$
(266
)
 
$
123
 
Comprehensive net income (loss)
 
$
123
   
$
143
   
$
109
   
$
23
   
$
(266
)
 
$
132
 
                                                 
Consolidating Statement of Cash Flows
                                               
Cash Flow from Operating Activities
 
$
   
$
24
   
$
212
   
$
97
   
$
   
$
333
 
Cash Flow from Investing Activities
                                               
Additions to  property, plant, and equipment
   
     
(8
)
   
(97
)
   
(30
)
   
     
(135
)
Proceeds from sale of assets
   
     
1
     
3
     
     
     
4
 
(Contributions) distributions to/from subsidiaries
   
(15
)
   
(443
)
   
     
     
458
     
 
Intercompany advances (repayments)
   
     
94
     
     
     
(94
)
   
 
Acquisition of business, net of cash acquired
   
     
     
(458
)
   
     
     
(458
)
Other investing activities, net
   
     
(1
)
   
     
     
     
(1
)
Net cash from investing activities
   
(15
)
   
(357
)
   
(552
)
   
(30
)
   
364
     
(590
)
 
                                               
Cash Flow from Financing Activities
                                               
Proceeds from long-term debt
   
     
595
     
     
     
     
595
 
Proceeds from issuance of common stock
   
15
     
     
     
     
     
15
 
Payment of tax receivable agreement
   
(60
)
   
     
     
     
     
(60
)
Repayments on long-term borrowings
   
     
(314
)
   
(2
)
   
(1
)
   
     
(317
)
Contribution from Parent
   
     
     
458
     
     
(458
)
   
 
Debt financing costs
   
     
(4
)
   
     
     
     
(4
)
Changes in intercompany balances
   
60
     
     
(114
)
   
(40
)
   
94
     
 
Net cash from financing activities
   
15
     
277
     
342
     
(41
)
   
(364
)