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 and disclosures at the date of the financial statements and during the reporting period. Actual results could differ from those estimates. Certain reclassifications have been made to prior periods to conform to current reporting. 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 Company's most recent Form 10-K filed with the Securities and Exchange Commission.
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 2018, with the exception of the below, there have been no developments to the recently adopted accounting pronouncements from those disclosed in the Company's 2017 Annual Report on Form 10-K that are considered to have a material impact on our unaudited consolidated financial statements.
Revenue Recognition
In May 2014, the FASB issued a final standard on revenue recognition. Under the new standard, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. For public entities, the provisions of the new standard are effective for annual reporting periods beginning after December 15, 2017 and interim periods therein. An entity can apply the new revenue standard on a full retrospective approach to each prior reporting period presented or on a modified retrospective approach with the cumulative effect of initially applying the standard recognized at the date of initial application in retained earnings.
The Company has evaluated a substantial portion of its contracts with key customers and is evaluating the provisions under the five-step model specified by the new standard. While the Company continues to evaluate the potential impacts of the new standard, based on procedures to date we do not expect a material impact to the consolidated financial statements. Adoption of the new standard will result in expanded revenue disclosures. The Company plans to adopt the new standard which will be effective for the Company beginning in fiscal 2019 using the modified retrospective approach.
Hedges
In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities in order to more closely align the results of hedge accounting with risk management activities through changes to the designation and measurement guidance. The new standard is effective for interim and annual periods beginning after December 15, 2018. The effect of adoption should be reflected on all active hedges as of the beginning of the fiscal year of adoption. The Company has chosen to early adopt this standard for fiscal 2018, and the adoption of this standard did not have a material impact on the consolidated financial statements.
Comprehensive Income
In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income. The new standard allows for a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. The new standard is effective for interim and annual periods beginning after December 15, 2018. The Company is currently evaluating the impact of this standard.
3. Acquisitions
AEP Industries Inc.
In January 2017, the Company acquired AEP Industries Inc. ("AEP") for a purchase price of $791 million, net of cash acquired. A portion of the purchase price consisted of issuing 6.4 million of Berry common shares which were valued at $324 million at the time of closing. AEP manufactures and markets an extensive and diverse line of polyethylene and polyvinyl chloride flexible plastic packaging products for 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.
Unaudited pro forma net sales were $5.5 billion for the three quarterly periods ended July 1, 2017. The unaudited pro forma net income was $232 million for the three quarterly periods ended July 1, 2017. The unaudited pro forma net sales and net income assume that the AEP acquisition had occurred at the beginning of the period.
Adchem Corp.
In June 2017, the Company acquired Adchem Corp.'s ("Adchem") tapes business for a purchase price of $49 million, which the Company financed using existing liquidity. Adchem is a leader in the development of high performance adhesive tape systems for the automotive, construction, electronics, graphic arts, medical and general tape markets. The acquired business is operated in our Engineered Materials segment.
Clopay Plastic Products Company, Inc.
In February 2018, the Company acquired Clopay Plastic Products Company, Inc. ("Clopay") for a purchase price of $474 million, which is preliminary and subject to adjustment. Clopay is an innovator in the development of printed breathable films, elastic films, and laminates with product offerings uniquely designed for applications used in a number of markets including: hygiene, healthcare, construction and industrial protective apparel. The acquired business is operated within our Health, Hygiene & Specialties segment. To finance the purchase, the Company issued $500 million aggregate principal amount of 4.5% second priority notes through a private placement offering.
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 Clopay 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 expects Goodwill to be deductible for tax purposes. The following table summarizes the preliminary purchase price allocation and estimated fair values of the assets acquired and liabilities assumed at the date of the acquisition:
Working capital (a)
|
|
$
|
70
|
|
Property and equipment
|
|
|
164
|
|
Intangible assets
|
|
|
118
|
|
Goodwill
|
|
|
123
|
|
Other assets and long-term liabilities
|
|
|
(1
|
)
|
(a) Includes a $3 million step up of inventory to fair value
|
|
4. Accounts Receivable Factoring Agreements
The Company has entered into various factoring agreements, both in the U.S. and at a number of foreign subsidiaries, 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.
There were no amounts outstanding from financial institutions related to U.S. based programs at June 30, 2018 or September 30, 2017. Gross amounts factored under these U.S. based programs at June 30, 2018 and September 30, 2017 were $108 million and $129 million, respectively. 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 charges associated with acquisition integrations and facility exit costs. The tables below set forth the significant components of the restructuring charges recognized, by segment:
|
|
Quarterly Period Ended
|
|
|
Three Quarterly Periods Ended
|
|
|
|
June 30, 2018
|
|
|
July 1, 2017
|
|
|
June 30, 2018
|
|
|
July 1, 2017
|
|
Engineered Materials
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
4
|
|
|
$
|
4
|
|
Health, Hygiene & Specialties
|
|
|
4
|
|
|
|
4
|
|
|
|
26
|
|
|
|
8
|
|
Consumer Packaging
|
|
|
1
|
|
|
|
2
|
|
|
|
3
|
|
|
|
6
|
|
Consolidated
|
|
$
|
7
|
|
|
$
|
8
|
|
|
$
|
33
|
|
|
$
|
18
|
|
The table below sets forth the activity with respect to the restructuring accrual at June 30, 2018:
|
|
Employee Severance and Benefits
|
|
|
Facility Exit
Costs
|
|
|
Total
|
|
Balance at September 30, 2017
|
|
$
|
14
|
|
|
$
|
5
|
|
|
$
|
19
|
|
Charges
|
|
|
31
|
|
|
|
2
|
|
|
|
33
|
|
Cash payments
|
|
|
(30
|
)
|
|
|
(3
|
)
|
|
|
(33
|
)
|
Balance at June 30, 2018
|
|
$
|
15
|
|
|
$
|
4
|
|
|
$
|
19
|
|
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:
|
|
June 30, 2018
|
|
|
September 30, 2017
|
|
Employee compensation
|
|
$
|
109
|
|
|
$
|
147
|
|
Accrued taxes
|
|
|
73
|
|
|
|
90
|
|
Rebates
|
|
|
54
|
|
|
|
58
|
|
Interest
|
|
|
38
|
|
|
|
36
|
|
Tax receivable agreement obligation
|
|
|
24
|
|
|
|
35
|
|
Restructuring
|
|
|
19
|
|
|
|
19
|
|
Accrued operating expenses
|
|
|
84
|
|
|
|
78
|
|
|
|
$
|
401
|
|
|
$
|
463
|
|
The following table sets forth the totals included in Other long-term liabilities on the Consolidated Balance Sheets:
|
|
June 30, 2018
|
|
|
September 30, 2017
|
|
Pension liability
|
|
$
|
53
|
|
|
$
|
56
|
|
Lease retirement obligation
|
|
|
43
|
|
|
|
37
|
|
Deferred purchase price
|
|
|
41
|
|
|
|
46
|
|
Transition tax
|
|
|
36
|
|
|
|
—
|
|
Sale-lease back deferred gain
|
|
|
22
|
|
|
|
24
|
|
Derivative instruments
|
|
|
16
|
|
|
|
27
|
|
Tax receivable agreement obligation
|
|
|
13
|
|
|
|
34
|
|
Other
|
|
|
73
|
|
|
|
76
|
|
|
|
$
|
297
|
|
|
$
|
300
|
|
7.
Long-Term Debt
Long-term debt consists of the following:
|
Maturity Date
|
|
June 30, 2018
|
|
|
September 30, 2017
|
|
Term loan
|
February 2020
|
|
$
|
800
|
|
|
$
|
1,000
|
|
Term loan
|
January 2021
|
|
|
814
|
|
|
|
814
|
|
Term loan
|
October 2022
|
|
|
1,645
|
|
|
|
1,645
|
|
Term loan
|
January 2024
|
|
|
494
|
|
|
|
498
|
|
Revolving line of credit
|
May 2020
|
|
|
—
|
|
|
|
—
|
|
5
1
/
2
% Second Priority Senior Secured Notes
|
May 2022
|
|
|
500
|
|
|
|
500
|
|
6% Second Priority Senior Secured Notes
|
October 2022
|
|
|
400
|
|
|
|
400
|
|
5
1
/
8
% Second Priority Senior Secured Notes
|
July 2023
|
|
|
700
|
|
|
|
700
|
|
4
1
/
2
% Second Priority Senior Secured Notes
|
February 2026
|
|
|
500
|
|
|
|
—
|
|
Debt discounts and deferred fees
|
|
|
|
(46
|
)
|
|
|
(48
|
)
|
Capital leases and other
|
Various
|
|
|
138
|
|
|
|
132
|
|
Total long-term debt
|
|
|
|
5,945
|
|
|
|
5,641
|
|
Current portion of long-term debt
|
|
|
|
(35
|
)
|
|
|
(33
|
)
|
Long-term debt, less current portion
|
|
|
$
|
5,910
|
|
|
$
|
5,608
|
|
The Company was in compliance with all debt covenants for all periods presented.
Debt discounts and deferred financing fees are presented net of Long-term debt, less the current portion on the Consolidated Balance Sheets and are amortized to Interest expense through maturity.
4
1
/
2
% Second Priority Senior Secured Notes
In January 2018, the Company issued $500 million aggregate principal amount of 4.50% second priority senior secured notes due 2026. Interest on these notes is due semiannually in February and August. The Company recognized $4 million of debt discount related to this offering. The net proceeds were used to fund the Clopay acquisition.
Term Loans
In November 2017, February 2018, and May 2018, the Company executed agreements to reduce interest rates under certain term loans. The term loans with a maturity date of February 2020 and January 2021 bear interest at LIBOR plus 1.75%. The term loans with a maturity date of October 2022 and January 2024 bear interest at LIBOR plus 2.00%.
During fiscal 2018, the Company has made $224 million of repayments on long-term borrowings using existing liquidity.
8.
Financial Instruments and Fair Value Measurements
In the normal course of business, the Company is exposed to certain risks arising from business operations and economic factors. The Company may use derivative financial instruments to help manage market risk and reduce the exposure to fluctuations in interest rates and foreign currencies. These financial instruments are not used for trading or other speculative purposes. For those derivative instruments that are designated and qualify as hedging instruments, the Company must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation.
To the extent hedging relationships are found to be effective, as determined by FASB guidance, changes in the fair value of the derivatives are offset by changes in the fair value of the related hedged item and recorded to Accumulated other comprehensive loss. Any identified ineffectiveness, or changes in the fair value of a derivative not designated as a hedge, is recorded to the Consolidated Statements of Income.
Cross-Currency Swaps
In November 2017, the Company entered into certain cross-currency swap agreements with a notional amount of 250 million euro to effectively convert a portion of our fixed-rate U.S. dollar denominated term loans, including the monthly interest payments, to fixed-rate euro-denominated debt. The swap agreements mature in May 2022. The risk management objective is to manage foreign currency risk relating to net investments in certain European subsidiaries denominated in foreign currencies and reduce the variability in the functional currency cash flows of a portion of the Company's term loans. Changes in fair value of the derivative instruments are recognized in a component of Accumulated other comprehensive loss, to offset the changes in the values of the net investments being hedged.
Interest Rate Swaps
The primary purpose of the Company's interest rate swap activities is to manage cash flow variability associated with our outstanding variable rate term loan debt.
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 through the original term of the swap agreement.
During fiscal 2017 the Company modified various term loan rates and maturities. In conjunction with these modifications the Company realigned existing swap agreements which resulted in the de-designation of the original hedge and re-designation of the modified swaps as effective cash flow hedges. The amounts included in Accumulated other comprehensive loss at the date of de-designation are being amortized to Interest expense through the terms of the original swaps.
In June 2018, the Company elected to settle two of its derivative instruments with expiration dates in June 2019 and September 2021, and received $9 million and $21 million, respectively. The offset is included in Accumulated other comprehensive loss and is being amortized to Interest expense through the original expiration dates for of each of the swap agreements. The Company also entered into a $1 billion interest rate swap transaction that swaps a one-month variable LIBOR contract for a fixed annual rate of 2.808% with an effective date of June 2018 and expiration in September 2021.
At June 30, 2018, the Company effectively had (i) a $450 million interest rate swap transaction that swaps a one-month variable LIBOR contract for a fixed annual rate of 2.000%, with an effective date in May 2017 and expiration in May 2022 and (ii) a $1 billion interest rate swap transaction that swaps a one-month variable LIBOR contract for a fixed annual rate of 2.808% with an effective date in June 2018 and expiration in September 2021.
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. When valuing swaps the Company utilizes Level 2 inputs (substantially observable). Balances on a gross basis as of the current period are as follows:
Derivative Instruments
|
Hedge Designation
|
Balance Sheet Location
|
|
June 30, 2018
|
|
|
September 30, 2017
|
|
Cross-currency swaps
|
Designated
|
Other long-term liabilities
|
|
$
|
10
|
|
|
$
|
—
|
|
Interest rate swaps
|
Designated
|
Other assets
|
|
|
12
|
|
|
|
1
|
|
Interest rate swaps
|
Not designated
|
Other assets
|
|
|
1
|
|
|
|
13
|
|
Interest rate swaps
|
Designated
|
Other long-term liabilities
|
|
|
4
|
|
|
|
15
|
|
Interest rate swaps
|
Not designated
|
Other long-term liabilities
|
|
|
2
|
|
|
|
13
|
|
The effect of the Company's derivative instruments on the Consolidated Statements of Income is as follows:
|
|
Quarterly Period Ended
|
|
Three Quarterly Periods Ended
|
|
Derivative Instruments
|
Statements of Income Location
|
June 30, 2018
|
|
July 1, 2017
|
|
June 30, 2018
|
|
July 1, 2017
|
|
Cross-currency swaps
|
Interest expense, net
|
|
$
|
(2
|
)
|
|
$
|
—
|
|
|
$
|
(4
|
)
|
|
$
|
—
|
|
Foreign currency swaps
|
Other expense, net
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
Interest rate swaps
|
Interest expense, net
|
|
|
(1
|
)
|
|
|
5
|
|
|
|
2
|
|
|
|
15
|
|
The amortization related to unrealized Interest rate swap interest income within Accumulated other comprehensive loss is expected to be $13 million in the next 12 months.
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 2017 assessment. However, as a result of the existence of impairment indicators in our Health, Hygiene & Specialties - South America ("HHS-SA") reporting unit during the quarter, we concluded that an interim impairment test was necessary. The reporting unit's fair value is estimated based on a market approach and a discounted cash flow analysis and is reconciled back to the current market capitalization for Berry Global Group, Inc. to ensure that the implied control premium is reasonable. Our forecasts assumed overall revenue growth of 2% increasing to 4% in the terminal year, margins consistent with historical results, a discount rate of 14% applied to the forecasted cash flows, and capital expenditure levels consistent with historical spend. The fair value of the HHS-SA reporting unit exceeded its carrying value by 5%. However, future declines in valuation market multiples, sustained lower earnings, or macroeconomic challenges could impact future impairment tests. The goodwill balance for the HHS-SA reporting unit as of June 30, 2018 was $92 million.
Included in the following table are the major categories of assets measured at fair value on a non-recurring basis as of June 30, 2018 and September 30, 2017, along with the impairment loss recognized on the fair value measurement during the period:
|
|
As of June 30, 2018
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Impairment
|
|
Indefinite-lived trademarks
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
248
|
|
|
$
|
248
|
|
|
$
|
—
|
|
Goodwill
|
|
|
—
|
|
|
|
—
|
|
|
|
2,880
|
|
|
|
2,880
|
|
|
|
—
|
|
Definite lived intangible assets
|
|
|
—
|
|
|
|
—
|
|
|
|
1,029
|
|
|
|
1,029
|
|
|
|
—
|
|
Property, plant, and equipment
|
|
|
—
|
|
|
|
—
|
|
|
|
2,507
|
|
|
|
2,507
|
|
|
|
—
|
|
Total
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,664
|
|
|
$
|
6,664
|
|
|
$
|
—
|
|
|
|
As of September 30, 2017
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Impairment
|
|
Indefinite-lived trademarks
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
248
|
|
|
$
|
248
|
|
|
$
|
—
|
|
Goodwill
|
|
|
—
|
|
|
|
—
|
|
|
|
2,775
|
|
|
|
2,775
|
|
|
|
—
|
|
Definite lived intangible assets
|
|
|
—
|
|
|
|
—
|
|
|
|
1,038
|
|
|
|
1,038
|
|
|
|
—
|
|
Property, plant, and equipment
|
|
|
—
|
|
|
|
—
|
|
|
|
2,366
|
|
|
|
2,366
|
|
|
|
2
|
|
Total
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,427
|
|
|
$
|
6,427
|
|
|
$
|
2
|
|
The Company's financial instruments consist primarily of cash and cash equivalents and long-term debt. The book value of our marketable long-term indebtedness exceeded fair value by $22 million as of June 30, 2018. 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
In December 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act significantly revises the future ongoing U.S. corporate income tax by, among other things, lowering U.S. corporate income tax rates. As the Company has a September fiscal year-end, the lower corporate income tax rate will be phased in during fiscal 2018 and will be 21% in subsequent years. Partially offsetting the lower corporate income tax, the Tax Act also eliminates certain domestic deductions that were previously included in our estimated annual tax rate. As part of the transition to the new tax system, the Tax Act (i) imposes a one-time repatriation tax on deemed repatriation of historical earnings of foreign subsidiaries and (ii) requires the Company revalue our U.S. net deferred tax liability position to the lower federal base rate of 21%. These transitional impacts resulted in a provisional transition benefit of $95 million for the first fiscal quarter, comprised of an estimated repatriation tax charge of $44 million (comprised of the U.S. repatriation taxes and foreign withholding taxes) and an estimated net deferred tax revaluation benefit of $139 million. The estimated impact of the corporate income tax net reduction along with the transitional taxes were recorded to the Consolidated Statements of Income in the Company's first fiscal quarter.
The changes included in the Tax Act are broad and complex. The final transition impacts of the Tax Act may differ from the above estimate, possibly materially, due to, among other things, changes in interpretations of the Tax Act, any legislative action to address questions that arise because of the Tax Act, any changes in accounting standards for income taxes or related interpretations in response to the Tax Act, or any updates or changes to estimates the Company has utilized to calculate the transition impacts. The Securities and Exchange Commission has issued guidance that would allow for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts. We currently anticipate finalizing and recording any resulting adjustments by the end of fiscal 2018.
The effective tax rate was 25% for the Quarter and was positively impacted by 1% from the share-based compensation excess tax benefit deduction, 1% from research and development credits, and a 2% benefit from the domestic manufacturing deduction. These favorable items were partially offset by increases of 3% from U.S. state income taxes, 2% from foreign valuation allowance, and other discrete items.
10. Operating Segments
The Company's operations are organized into three operating segments: Engineered Materials, Health, Hygiene & Specialties, and Consumer Packaging. The structure is designed to align us with our customers, provide optimal service, and drive future growth in a cost efficient manner. Selected information by reportable segment is presented in the following tables:
|
|
Quarterly Period Ended
|
|
|
Three Quarterly Periods Ended
|
|
|
|
June 30, 2018
|
|
|
July 1, 2017
|
|
|
June 30, 2018
|
|
|
July 1, 2017
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineered Materials
|
|
$
|
687
|
|
|
$
|
686
|
|
|
$
|
1,990
|
|
|
$
|
1,689
|
|
Health, Hygiene & Specialties
|
|
|
726
|
|
|
|
606
|
|
|
|
2,009
|
|
|
|
1,773
|
|
Consumer Packaging
|
|
|
659
|
|
|
|
614
|
|
|
|
1,816
|
|
|
|
1,752
|
|
Total net sales
|
|
$
|
2,072
|
|
|
$
|
1,906
|
|
|
$
|
5,815
|
|
|
$
|
5,214
|
|
Operating income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineered Materials
|
|
$
|
94
|
|
|
$
|
99
|
|
|
$
|
276
|
|
|
$
|
219
|
|
Health, Hygiene & Specialties
|
|
|
62
|
|
|
|
53
|
|
|
|
140
|
|
|
|
164
|
|
Consumer Packaging
|
|
|
60
|
|
|
|
60
|
|
|
|
151
|
|
|
|
150
|
|
Total operating income
|
|
$
|
216
|
|
|
$
|
212
|
|
|
$
|
567
|
|
|
$
|
533
|
|
Depreciation and amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineered Materials
|
|
$
|
26
|
|
|
$
|
30
|
|
|
$
|
82
|
|
|
$
|
73
|
|
Health, Hygiene & Specialties
|
|
|
51
|
|
|
|
46
|
|
|
|
146
|
|
|
|
136
|
|
Consumer Packaging
|
|
|
59
|
|
|
|
56
|
|
|
|
169
|
|
|
|
174
|
|
Total depreciation and amortization
|
|
$
|
136
|
|
|
$
|
132
|
|
|
$
|
397
|
|
|
$
|
383
|
|
|
|
June 30, 2018
|
|
|
September 30, 2017
|
|
Total assets:
|
|
|
|
|
|
|
Engineered Materials
|
|
$
|
1,795
|
|
|
$
|
1,803
|
|
Health, Hygiene & Specialties
|
|
|
3,963
|
|
|
|
3,496
|
|
Consumer Packaging
|
|
|
3,284
|
|
|
|
3,177
|
|
Total assets
|
|
$
|
9,042
|
|
|
$
|
8,476
|
|
|
|
|
|
|
|
|
|
|
Total goodwill:
|
|
|
|
|
|
|
|
|
Engineered Materials
|
|
$
|
550
|
|
|
$
|
545
|
|
Health, Hygiene & Specialties
|
|
|
921
|
|
|
|
819
|
|
Consumer Packaging
|
|
|
1,409
|
|
|
|
1,411
|
|
Total goodwill
|
|
$
|
2,880
|
|
|
$
|
2,775
|
|
Selected information by geographical region is presented in the following tables:
|
Quarterly Period Ended
|
|
Three Quarterly Periods Ended
|
|
|
June 30, 2018
|
|
July 1, 2017
|
|
June 30, 2018
|
|
July 1, 2017
|
|
Net sales:
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
1,636
|
|
|
$
|
1,591
|
|
|
$
|
4,703
|
|
|
$
|
4,289
|
|
South America
|
|
|
193
|
|
|
|
85
|
|
|
|
347
|
|
|
|
246
|
|
Europe
|
|
|
181
|
|
|
|
165
|
|
|
|
577
|
|
|
|
482
|
|
Asia
|
|
|
62
|
|
|
|
65
|
|
|
|
188
|
|
|
|
197
|
|
Total net sales
|
|
$
|
2,072
|
|
|
$
|
1,906
|
|
|
$
|
5,815
|
|
|
$
|
5,214
|
|
|
|
June 30, 2018
|
|
|
September 30, 2017
|
Long-lived assets:
|
|
|
|
|
|
|
North America
|
|
$
|
5,598
|
|
|
$
|
5,350
|
|
South America
|
|
|
343
|
|
|
|
371
|
|
Europe
|
|
|
459
|
|
|
|
467
|
|
Asia
|
|
|
305
|
|
|
|
284
|
|
Total Long-lived assets
|
|
$
|
6,705
|
|
|
$
|
6,472
|
|
Selected information by product line is presented in the following tables:
|
|
Quarterly Period Ended
|
|
|
Three Quarterly Periods Ended
|
|
(in percentages)
|
|
June 30, 2018
|
|
|
July 1, 2017
|
|
|
June 30, 2018
|
|
|
July 1, 2017
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Materials
|
|
|
46
|
%
|
|
|
46
|
%
|
|
|
46
|
%
|
|
|
46
|
%
|
Engineered Products
|
|
|
54
|
|
|
|
54
|
|
|
|
54
|
|
|
|
54
|
|
Engineered Materials
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health
|
|
|
16
|
%
|
|
|
22
|
%
|
|
|
17
|
%
|
|
|
22
|
%
|
Hygiene
|
|
|
52
|
|
|
|
44
|
|
|
|
48
|
|
|
|
44
|
|
Specialties
|
|
|
32
|
|
|
|
34
|
|
|
|
35
|
|
|
|
34
|
|
Health, Hygiene & Specialties
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rigid Open Top
|
|
|
45
|
%
|
|
|
44
|
%
|
|
|
43
|
%
|
|
|
42
|
%
|
Rigid Closed Top
|
|
|
55
|
|
|
|
56
|
|
|
|
57
|
|
|
|
58
|
|
Consumer Packaging
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
11. Contingencies and Commitments
The Company is party to various legal proceedings 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 calculated 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. There were no shares excluded from the calculations as the effect of their conversion into shares of our common stock would be antidilutive.
The following tables provide a reconciliation of the numerator and denominator of the basic and diluted net income per share calculations.
|
|
Quarterly Period Ended
|
|
|
Three Quarterly Periods Ended
|
|
(in millions, except per share amounts)
|
|
June 30, 2018
|
|
|
July 1, 2017
|
|
|
June 30, 2018
|
|
|
July 1, 2017
|
|
Numerator
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
110
|
|
|
$
|
107
|
|
|
$
|
363
|
|
|
$
|
230
|
|
Denominator
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - basic
|
|
|
131.7
|
|
|
|
129.9
|
|
|
|
131.3
|
|
|
|
126.6
|
|
Dilutive shares
|
|
|
3.7
|
|
|
|
5.3
|
|
|
|
4.5
|
|
|
|
4.8
|
|
Weighted average common and common equivalent shares outstanding - diluted
|
|
|
135.4
|
|
|
|
135.2
|
|
|
|
135.8
|
|
|
|
131.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common share income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.84
|
|
|
$
|
0.82
|
|
|
$
|
2.76
|
|
|
$
|
1.82
|
|
Diluted
|
|
$
|
0.81
|
|
|
$
|
0.79
|
|
|
$
|
2.67
|
|
|
$
|
1.75
|
|
13.
Accumulated Other Comprehensive Loss
The components and activity of Accumulated other comprehensive loss are as follows:
|
|
Currency Translation
|
|
|
Defined Benefit Pension and Retiree Health Benefit Plans
|
|
|
Interest Rate Swaps
|
|
|
Accumulated Other
Comprehensive
Loss
|
|
Balance at September 30, 2017
|
|
$
|
(48
|
)
|
|
$
|
(16
|
)
|
|
$
|
(4
|
)
|
|
$
|
(68
|
)
|
Other comprehensive income (loss) before reclassifications
|
|
|
(109
|
)
|
|
|
(1
|
)
|
|
|
42
|
|
|
|
(68
|
)
|
Net amount reclassified from accumulated other comprehensive income (loss)
|
|
|
—
|
|
|
|
—
|
|
|
|
5
|
|
|
|
5
|
|
Provision for income taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
(13
|
)
|
|
|
(13
|
)
|
Balance at June 30, 2018
|
|
$
|
(157
|
)
|
|
$
|
(17
|
)
|
|
$
|
30
|
|
|
$
|
(144
|
)
|
|
|
Currency Translation
|
|
|
Defined Benefit Pension and Retiree Health Benefit Plans
|
|
|
Interest Rate Swaps
|
|
|
Accumulated Other
Comprehensive
Loss
|
|
Balance at October 1, 2016
|
|
$
|
(82
|
)
|
|
$
|
(44
|
)
|
|
$
|
(22
|
)
|
|
$
|
(148
|
)
|
Other comprehensive income (loss) before reclassifications
|
|
|
4
|
|
|
|
13
|
|
|
|
5
|
|
|
|
22
|
|
Net amount reclassified from accumulated other comprehensive income (loss)
|
|
|
—
|
|
|
|
—
|
|
|
|
18
|
|
|
|
18
|
|
Provision for income taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
(8
|
)
|
|
|
(8
|
)
|
Balance at July 1, 2017
|
|
$
|
(78
|
)
|
|
$
|
(31
|
)
|
|
$
|
(7
|
)
|
|
$
|
(116
|
)
|
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 or in the case of a restricted subsidiary that is required to guarantee after the relevant issuance date, 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
|
|
June 30, 2018
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Guarantor
Subsidiaries
|
|
|
Non-
Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Total
|
|
Current assets
|
|
$
|
—
|
|
|
$
|
311
|
|
|
$
|
1,270
|
|
|
$
|
756
|
|
|
$
|
—
|
|
|
$
|
2,337
|
|
Intercompany receivable
|
|
|
332
|
|
|
|
2,101
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,433
|
)
|
|
|
—
|
|
Property, plant, and equipment, net
|
|
|
—
|
|
|
|
79
|
|
|
|
1,688
|
|
|
|
740
|
|
|
|
—
|
|
|
|
2,507
|
|
Other assets
|
|
|
1,378
|
|
|
|
5,995
|
|
|
|
4,713
|
|
|
|
497
|
|
|
|
(8,385
|
)
|
|
|
4,198
|
|
Total assets
|
|
$
|
1,710
|
|
|
$
|
8,486
|
|
|
$
|
7,671
|
|
|
$
|
1,993
|
|
|
$
|
(10,818
|
)
|
|
$
|
9,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
24
|
|
|
$
|
253
|
|
|
$
|
580
|
|
|
$
|
305
|
|
|
$
|
—
|
|
|
$
|
1,162
|
|
Intercompany payable
|
|
|
—
|
|
|
|
—
|
|
|
|
2,373
|
|
|
|
60
|
|
|
|
(2,433
|
)
|
|
|
—
|
|
Other long-term liabilities
|
|
|
347
|
|
|
|
6,049
|
|
|
|
85
|
|
|
|
60
|
|
|
|
—
|
|
|
|
6,541
|
|
Stockholders' equity
|
|
|
1,339
|
|
|
|
2,184
|
|
|
|
4,633
|
|
|
|
1,568
|
|
|
|
(8,385
|
)
|
|
|
1,339
|
|
Total liabilities and stockholders' equity
|
|
$
|
1,710
|
|
|
$
|
8,486
|
|
|
$
|
7,671
|
|
|
$
|
1,993
|
|
|
$
|
(10,818
|
)
|
|
$
|
9,042
|
|
|
|
September 30, 2017
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Guarantor
Subsidiaries
|
|
|
Non-
Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Total
|
|
Current assets
|
|
$
|
—
|
|
|
$
|
116
|
|
|
$
|
1,113
|
|
|
$
|
775
|
|
|
$
|
—
|
|
|
$
|
2,004
|
|
Intercompany receivable
|
|
|
512
|
|
|
|
2,217
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,729
|
)
|
|
|
—
|
|
Property, plant and equipment, net
|
|
|
—
|
|
|
|
80
|
|
|
|
1,564
|
|
|
|
722
|
|
|
|
—
|
|
|
|
2,366
|
|
Other assets
|
|
|
992
|
|
|
|
5,335
|
|
|
|
4,583
|
|
|
|
533
|
|
|
|
(7,337
|
)
|
|
|
4,106
|
|
Total assets
|
|
$
|
1,504
|
|
|
$
|
7,748
|
|
|
$
|
7,260
|
|
|
$
|
2,030
|
|
|
$
|
(10,066
|
)
|
|
$
|
8,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
36
|
|
|
$
|
243
|
|
|
$
|
537
|
|
|
$
|
318
|
|
|
$
|
—
|
|
|
$
|
1,134
|
|
Intercompany payable
|
|
|
—
|
|
|
|
—
|
|
|
|
2,667
|
|
|
|
62
|
|
|
|
(2,729
|
)
|
|
|
—
|
|
Other long-term liabilities
|
|
|
453
|
|
|
|
5,707
|
|
|
|
99
|
|
|
|
68
|
|
|
|
—
|
|
|
|
6,327
|
|
Stockholders' equity
|
|
|
1,015
|
|
|
|
1,798
|
|
|
|
3,957
|
|
|
|
1,582
|
|
|
|
(7,337
|
)
|
|
|
1,015
|
|
Total liabilities and stockholders' equity
|
|
$
|
1,504
|
|
|
$
|
7,748
|
|
|
$
|
7,260
|
|
|
$
|
2,030
|
|
|
$
|
(10,066
|
)
|
|
$
|
8,476
|
|
Condensed Supplemental Consolidated Statements of Income
|
|
Quarterly Period Ended June 30, 2018
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Guarantor
Subsidiaries
|
|
|
Non-
Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Total
|
|
Net sales
|
|
$
|
—
|
|
|
$
|
147
|
|
|
$
|
1,452
|
|
|
$
|
473
|
|
|
$
|
—
|
|
|
$
|
2,072
|
|
Cost of goods sold
|
|
|
—
|
|
|
|
121
|
|
|
|
1,173
|
|
|
|
396
|
|
|
|
—
|
|
|
|
1,690
|
|
Selling, general and administrative
|
|
|
—
|
|
|
|
14
|
|
|
|
70
|
|
|
|
35
|
|
|
|
—
|
|
|
|
119
|
|
Amortization of intangibles
|
|
|
—
|
|
|
|
—
|
|
|
|
34
|
|
|
|
6
|
|
|
|
—
|
|
|
|
40
|
|
Restructuring and impairment charges
|
|
|
—
|
|
|
|
—
|
|
|
|
4
|
|
|
|
3
|
|
|
|
—
|
|
|
|
7
|
|
Operating income
|
|
|
—
|
|
|
|
12
|
|
|
|
171
|
|
|
|
33
|
|
|
|
—
|
|
|
|
216
|
|
Other expense (income), net
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
2
|
|
|
|
—
|
|
|
|
3
|
|
Interest expense, net
|
|
|
—
|
|
|
|
5
|
|
|
|
46
|
|
|
|
16
|
|
|
|
—
|
|
|
|
67
|
|
Equity in net income of subsidiaries
|
|
|
(146
|
)
|
|
|
(128
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
274
|
|
|
|
—
|
|
Income before income taxes
|
|
|
146
|
|
|
|
135
|
|
|
|
124
|
|
|
|
15
|
|
|
|
(274
|
)
|
|
|
146
|
|
Income tax expense
|
|
|
36
|
|
|
|
25
|
|
|
|
3
|
|
|
|
8
|
|
|
|
(36
|
)
|
|
|
36
|
|
Net income
|
|
$
|
110
|
|
|
$
|
110
|
|
|
$
|
121
|
|
|
$
|
7
|
|
|
$
|
(238
|
)
|
|
$
|
110
|
|
Comprehensive net income
|
|
$
|
110
|
|
|
$
|
133
|
|
|
$
|
121
|
|
|
$
|
(104
|
)
|
|
$
|
(238
|
)
|
|
$
|
22
|
|
|
|
Quarterly Period Ended July 1, 2017
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Guarantor
Subsidiaries
|
|
|
Non-
Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Total
|
|
Net sales
|
|
$
|
—
|
|
|
$
|
152
|
|
|
$
|
1,325
|
|
|
$
|
429
|
|
|
$
|
—
|
|
|
$
|
1,906
|
|
Cost of goods sold
|
|
|
—
|
|
|
|
100
|
|
|
|
1,059
|
|
|
|
359
|
|
|
|
—
|
|
|
|
1,518
|
|
Selling, general and administrative
|
|
|
—
|
|
|
|
14
|
|
|
|
89
|
|
|
|
25
|
|
|
|
—
|
|
|
|
128
|
|
Amortization of intangibles
|
|
|
—
|
|
|
|
2
|
|
|
|
31
|
|
|
|
7
|
|
|
|
—
|
|
|
|
40
|
|
Restructuring and impairment charges
|
|
|
—
|
|
|
|
—
|
|
|
|
-
|
|
|
|
8
|
|
|
|
—
|
|
|
|
8
|
|
Operating income
|
|
|
—
|
|
|
|
36
|
|
|
|
146
|
|
|
|
30
|
|
|
|
—
|
|
|
|
212
|
|
Other expense (income), net
|
|
|
—
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
(1
|
)
|
Interest expense, net
|
|
|
—
|
|
|
|
5
|
|
|
|
47
|
|
|
|
16
|
|
|
|
—
|
|
|
|
68
|
|
Equity in net income of subsidiaries
|
|
|
(145
|
)
|
|
|
(109
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
254
|
|
|
|
—
|
|
Income before income taxes
|
|
|
145
|
|
|
|
139
|
|
|
|
100
|
|
|
|
15
|
|
|
|
(254
|
)
|
|
|
145
|
|
Income tax expense
|
|
|
38
|
|
|
|
32
|
|
|
|
—
|
|
|
|
6
|
|
|
|
(38
|
)
|
|
|
38
|
|
Net income
|
|
$
|
107
|
|
|
$
|
107
|
|
|
$
|
100
|
|
|
$
|
9
|
|
|
$
|
(216
|
)
|
|
$
|
107
|
|
Comprehensive net income
|
|
$
|
107
|
|
|
$
|
102
|
|
|
$
|
100
|
|
|
$
|
37
|
|
|
$
|
(216
|
)
|
|
$
|
130
|
|
|
|
Three Quarterly Periods Ended June 30, 2018
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Guarantor
Subsidiaries
|
|
|
Non-
Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Total
|
|
Net sales
|
|
$
|
—
|
|
|
$
|
424
|
|
|
$
|
4,026
|
|
|
$
|
1,365
|
|
|
$
|
—
|
|
|
$
|
5,815
|
|
Cost of goods sold
|
|
|
—
|
|
|
|
322
|
|
|
|
3,265
|
|
|
|
1,146
|
|
|
|
—
|
|
|
|
4,733
|
|
Selling, general and administrative
|
|
|
—
|
|
|
|
44
|
|
|
|
233
|
|
|
|
89
|
|
|
|
—
|
|
|
|
366
|
|
Amortization of intangibles
|
|
|
—
|
|
|
|
—
|
|
|
|
96
|
|
|
|
20
|
|
|
|
—
|
|
|
|
116
|
|
Restructuring and impairment charges
|
|
|
—
|
|
|
|
—
|
|
|
|
20
|
|
|
|
13
|
|
|
|
—
|
|
|
|
33
|
|
Operating income
|
|
|
—
|
|
|
|
58
|
|
|
|
412
|
|
|
|
97
|
|
|
|
—
|
|
|
|
567
|
|
Other expense (income), net
|
|
|
—
|
|
|
|
5
|
|
|
|
8
|
|
|
|
4
|
|
|
|
—
|
|
|
|
17
|
|
Interest expense, net
|
|
|
—
|
|
|
|
14
|
|
|
|
134
|
|
|
|
47
|
|
|
|
—
|
|
|
|
195
|
|
Equity in net income of subsidiaries
|
|
|
(355
|
)
|
|
|
(287
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
642
|
|
|
|
—
|
|
Income before income taxes
|
|
|
355
|
|
|
|
326
|
|
|
|
270
|
|
|
|
46
|
|
|
|
(642
|
)
|
|
|
355
|
|
Income tax expense
|
|
|
(8
|
)
|
|
|
(37
|
)
|
|
|
4
|
|
|
|
25
|
|
|
|
8
|
|
|
|
(8
|
)
|
Net income
|
|
$
|
363
|
|
|
$
|
363
|
|
|
$
|
266
|
|
|
$
|
21
|
|
|
$
|
(650
|
)
|
|
$
|
363
|
|
Comprehensive net income
|
|
$
|
363
|
|
|
$
|
387
|
|
|
$
|
266
|
|
|
$
|
(79
|
)
|
|
$
|
(650
|
)
|
|
$
|
287
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow from Operating Activities
|
|
$
|
—
|
|
|
$
|
29
|
|
|
$
|
480
|
|
|
$
|
47
|
|
|
$
|
—
|
|
|
$
|
556
|
|
Cash Flow from Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property, plant, and equipment
|
|
|
—
|
|
|
|
(5
|
)
|
|
|
(194
|
)
|
|
|
(71
|
)
|
|
|
—
|
|
|
|
(270
|
)
|
Proceeds from sale of assets
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3
|
|
|
|
—
|
|
|
|
3
|
|
Contributions (to)/from subsidiaries
|
|
|
(17
|
)
|
|
|
(457
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
474
|
|
|
|
—
|
|
Intercompany
|
|
|
—
|
|
|
|
314
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(314
|
)
|
|
|
—
|
|
Acquisition of business, net of cash acquired
|
|
|
—
|
|
|
|
—
|
|
|
|
(404
|
)
|
|
|
(70
|
)
|
|
|
—
|
|
|
|
(474
|
)
|
Other investing activities, net
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net cash from investing activities
|
|
|
(17
|
)
|
|
|
(148
|
)
|
|
|
(598
|
)
|
|
|
(138
|
)
|
|
|
160
|
|
|
|
(741
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow from Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from long-term debt
|
|
|
—
|
|
|
|
497
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
497
|
|
Repayments on long-term borrowings
|
|
|
—
|
|
|
|
(219
|
)
|
|
|
(5
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(224
|
)
|
Proceeds from issuance of common stock
|
|
|
17
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
17
|
|
Payment of tax receivable agreement
|
|
|
(37
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(37
|
)
|
Contribution from Parent
|
|
|
—
|
|
|
|
—
|
|
|
|
404
|
|
|
|
70
|
|
|
|
(474
|
)
|
|
|
—
|
|
Debt financing costs
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
Changes in intercompany balances
|
|
|
37
|
|
|
|
—
|
|
|
|
(291
|
)
|
|
|
(60
|
)
|
|
|
314
|
|
|
|
—
|
|
Net cash from financing activities
|
|
|
17
|
|
|
|
277
|
|
|
|
108
|
|
|
|
10
|
|
|
|
(160
|
)
|
|
|
252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(8
|
)
|
|
|
—
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash
|
|
|
—
|
|
|
|
158
|
|
|
|
(10
|
)
|
|
|
(89
|
)
|
|
|
—
|
|
|
|
59
|
|
Cash and cash equivalents at beginning of period
|
|
|
—
|
|
|
|
18
|
|
|
|
12
|
|
|
|
276
|
|
|
|
—
|
|
|
|
306
|
|
Cash and cash equivalents at end of period
|
|
$
|
—
|
|
|
$
|
176
|
|
|
$
|
2
|
|
|
$
|
187
|
|
|
$
|
—
|
|
|
$
|
365
|
|
|
|
Three Quarterly Periods Ended July 1, 2017
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Guarantor
Subsidiaries
|
|
|
Non-
Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Total
|
|
Net sales
|
|
$
|
—
|
|
|
$
|
441
|
|
|
$
|
3,556
|
|
|
$
|
1,217
|
|
|
$
|
—
|
|
|
$
|
5,214
|
|
Cost of goods sold
|
|
|
—
|
|
|
|
333
|
|
|
|
2,860
|
|
|
|
984
|
|
|
|
—
|
|
|
|
4,177
|
|
Selling, general and administrative
|
|
|
—
|
|
|
|
45
|
|
|
|
251
|
|
|
|
77
|
|
|
|
—
|
|
|
|
373
|
|
Amortization of intangibles
|
|
|
—
|
|
|
|
5
|
|
|
|
87
|
|
|
|
21
|
|
|
|
—
|
|
|
|
113
|
|
Restructuring and impairment charges
|
|
|
—
|
|
|
|
—
|
|
|
|
10
|
|
|
|
8
|
|
|
|
—
|
|
|
|
18
|
|
Operating income
|
|
|
—
|
|
|
|
58
|
|
|
|
348
|
|
|
|
127
|
|
|
|
—
|
|
|
|
533
|
|
Other expense (income), net
|
|
|
—
|
|
|
|
15
|
|
|
|
1
|
|
|
|
2
|
|
|
|
—
|
|
|
|
18
|
|
Interest expense, net
|
|
|
—
|
|
|
|
17
|
|
|
|
138
|
|
|
|
48
|
|
|
|
—
|
|
|
|
203
|
|
Equity in net income of subsidiaries
|
|
|
(312
|
)
|
|
|
(252
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
564
|
|
|
|
—
|
|
Income before income taxes
|
|
|
312
|
|
|
|
278
|
|
|
|
209
|
|
|
|
77
|
|
|
|
(564
|
)
|
|
|
312
|
|
Income tax expense
|
|
|
82
|
|
|
|
48
|
|
|
|
—
|
|
|
|
34
|
|
|
|
(82
|
)
|
|
|
82
|
|
Net income
|
|
$
|
230
|
|
|
$
|
230
|
|
|
$
|
209
|
|
|
$
|
43
|
|
|
$
|
(482
|
)
|
|
$
|
230
|
|
Comprehensive net income
|
|
$
|
230
|
|
|
$
|
245
|
|
|
$
|
209
|
|
|
$
|
60
|
|
|
$
|
(482
|
)
|
|
$
|
262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow from Operating Activities
|
|
$
|
—
|
|
|
$
|
31
|
|
|
$
|
420
|
|
|
$
|
129
|
|
|
$
|
—
|
|
|
$
|
580
|
|
Cash Flow from Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property, plant, and equipment
|
|
|
—
|
|
|
|
(11
|
)
|
|
|
(160
|
)
|
|
|
(30
|
)
|
|
|
—
|
|
|
|
(201
|
)
|
Proceeds from sale of assets
|
|
|
—
|
|
|
|
1
|
|
|
|
3
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4
|
|
Contributions (to)/from subsidiaries
|
|
|
(26
|
)
|
|
|
(489
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
515
|
|
|
|
—
|
|
Intercompany
|
|
|
—
|
|
|
|
280
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(280
|
)
|
|
|
—
|
|
Acquisition of business, net of cash acquired
|
|
|
—
|
|
|
|
—
|
|
|
|
(515
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(515
|
)
|
Other investing activities, net
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
Net cash from investing activities
|
|
|
(26
|
)
|
|
|
(220
|
)
|
|
|
(672
|
)
|
|
|
(30
|
)
|
|
|
235
|
|
|
|
(713
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow from Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from long-term debt
|
|
|
—
|
|
|
|
545
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
545
|
|
Repayments on long-term borrowings
|
|
|
—
|
|
|
|
(423
|
)
|
|
|
(3
|
)
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
(427
|
)
|
Proceeds from issuance of common stock
|
|
|
26
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
26
|
|
Payment of tax receivable agreement
|
|
|
(60
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(60
|
)
|
Debt financing costs
|
|
|
—
|
|
|
|
(4
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(4
|
)
|
Contribution from parent
|
|
|
—
|
|
|
|
—
|
|
|
|
515
|
|
|
|
—
|
|
|
|
(515
|
)
|
|
|
—
|
|
Changes in intercompany balances
|
|
|
60
|
|
|
|
—
|
|
|
|
(255
|
)
|
|
|
(85
|
)
|
|
|
280
|
|
|
|
—
|
|
Net cash from financing activities
|
|
|
26
|
|
|
|
118
|
|
|
|
257
|
|
|
|
(86
|
)
|
|
|
(235
|
)
|
|
|
80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5
|
|
|
|
—
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash
|
|
|
—
|
|
|
|
(71
|
)
|
|
|
5
|
|
|
|
18
|
|
|
|
—
|
|
|
|
(48
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
—
|
|
|
|
102
|
|
|
|
5
|
|
|
|
216
|
|
|
|
—
|
|
|
|
323
|
|
Cash and cash equivalents at end of period
|
|
$
|
—
|
|
|
$
|
31
|
|
|
$
|
10
|
|
|
$
|
234
|
|
|
$
|
—
|
|
|
$
|
275
|
|
15. Subsequent Events
In August 2018, the Company announced that its Board has authorized a $500 million share repurchase program. Share repurchases, if any, will be made through open market purchases, privately negotiated transactions, Rule 10b5-1 plans, or other transactions in accordance with applicable securities laws and in such amounts at such times as we deem appropriate based upon prevailing market and business conditions and other factors. The share repurchase program has no expiration date and may be suspended at any time.