UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 forFor the quarterly period ended December 30, 2017June 27, 2020

OR

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number 001-35672
graphic





BERRY GLOBAL GROUP, INC.

A Delaware corporation
 101 Oakley Street, Evansville, Indiana, 47710
(812) 424-2904
 IRS employer identification number
20-5234618


Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934 (the "Exchange Act"):Act:

Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par value per shareBERYNew York Stock Exchange

Indicate by check mark whether the registrant: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 for such shorter period that the registrant was required to file such reports), and (2) havehas 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, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☒
Accelerated Filer  ☐
Non-accelerated Filer ☐
Smaller Reporting Company ☐
Emerging Growth Company ☐
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 12b-213(a) of the Exchange Act.  Yes   ☐   No   ☐


Indicate by check mark whether the registrant is a shell company as(as defined in Rule 12b-2 of the Exchange Act.  Act). Yes  ☐ No  ☒
Yes     No  
ClassOutstanding at February 7, 2018
Common Stock, $.01 par value per share131.2 million shares
There were 132.6 million shares of common stock outstanding at July 31, 2020.
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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, as amended, 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"“believes,” “expects,” “may,” “will,” “should,” “would,” “could,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” “outlook,” “anticipates” or "looking forward"“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. 10-Q, and we undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

Readers should carefully review the factors discussed in our 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.


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Berry Global Group, Inc.
Form 10-Q Index
For Quarterly Period Ended December 30, 2017June 27, 2020

Part I.Financial InformationPage No.
 Item 1.Financial Statements: 
  
Consolidated Statements of Income and Comprehensive Income
4
  
Consolidated Balance Sheets
5
  
Consolidated Statements of Changes in Stockholders' Equity
6
Consolidated Statements of Cash Flows
67
  
Notes to Consolidated Financial Statements
7
8
 Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
18
17
 Item 3.
Quantitative and Qualitative Disclosures about Market Risk
23
24
 Item 4.
Controls and Procedures
24
25
Part II.Other Information 
 Item 1.
Legal ProceedingProceedings
25
26
 Item 1A.
Risk Factors
26
Item 2.
25Unregistered Sales of Equity Securities and Use of Proceeds
28
 Item 6.
Exhibits
26
29
 
Signature
27
30

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Part I. Financial Information

Item 1.Financial Statements

Berry Global Group, Inc.
Consolidated StatementStatements of Income
(Unaudited)
(in millions of dollars, except per share amounts)

 Quarterly Period Ended  Quarterly Period Ended  Three Quarterly Periods Ended 
 December 30, 2017  December 31, 2016  June 27, 2020  June 29, 2019  June 27, 2020  June 29, 2019 
Net sales  $1,776  $1,502  $2,910  $1,937  $8,701  $5,859 
Costs and expenses:                        
Cost of goods sold   1,447   1,206   2,272   1,559   6,959   4,737 
Selling, general and administrative   117   113   198   125   631   392 
Amortization of intangibles   38   33   74   38   226   119 
Restructuring and impairment charges  11   4 
Restructuring and transaction activities  19   —   55   35 
Operating income   163   146   347   215   830   576 
Other expense (income), net   9   (1)
Other (income) expense, net  (7)  136   6   159 
Interest expense, net   62   68   110   71   339   201 
Income before income taxes   92   79   244   8   485   216 
Income tax expense (benefit)  (71)  28   53   (5)  121   41 
Net income  $163  $51  $191  $13  $364  $175 
                        
Net income per share:                        
Basic  $1.24  $0.42  $1.44  $0.10  $2.75  $1.34 
Diluted   1.20   0.40   1.42   0.10   2.71   1.31 
Outstanding weighted-average shares:                        
Basic   131.0   122.0   132.5   131.5   132.4   131.0 
Diluted   136.0   127.8   134.2   134.2   134.3   134.0 






Consolidated Statements of Comprehensive Income
(Unaudited)
(in millions of dollars)

  Quarterly Period Ended 
  December 30, 2017  December 31, 2016 
Net income  $163  $51 
Currency translation   (24)  (45)
Pension and other postretirement benefits  (1)  — 
Interest rate hedges   17   17 
Provision for income taxes  (4)  (6)
Other comprehensive loss, net of tax  (12)  (34)
Comprehensive income  $151  $17 
  Quarterly Period Ended  Three Quarterly Periods Ended 
  June 27, 2020  June 29, 2019  June 27, 2020  June 29, 2019 
Net income $191  $13  $364  $175 
Other comprehensive income (loss), net of tax:                
Currency translation  11   10   (54)  12 
Pension  —   —   (1)  — 
Derivative instruments  (13)  (35)  (109)  (67)
Other comprehensive income (loss)  (2)  (25)  (164)  (55)
Comprehensive income (loss) $189  $(12) $200  $120 

See notes to consolidated financial statements.


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BerryBerry Global Group, Inc.
Consolidated Balance Sheets
(in millions of dollars)

 June 27, 2020  September 28, 2019 
 December 30, 2017  September 30, 2017  (Unaudited)    
Assets (Unaudited)          
      
Current assets:            
Cash and cash equivalents  $228  $306  $906  $750 
Accounts receivable (less allowance of $13)  780   847 
Inventories:        
Accounts receivable (less allowance of 28 and 28, respectively)  1,471   1,526 
Finished goods   498   428   750   743 
Raw materials and supplies   380   334   568   581 
  878   762 
Prepaid expenses and other current assets   95   89   162   157 
Total current assets   1,981   2,004   3,857   3,757 
Property, plant, and equipment, net   2,363   2,366 
Goodwill and intangible assets, net  4,024   4,061 
Noncurrent assets:        
Property, plant, and equipment  4,481   4,714 
Goodwill and intangible assets  7,720   7,831 
Right-of-use assets  563   — 
Other assets   52   45   110   167 
Total assets  $8,420  $8,476  $16,731  $16,469 
                
Liabilities        
                
Liabilities and stockholders' equity        
Current liabilities:                
Accounts payable  $666  $638  $981  $1,159 
Accrued expenses and other current liabilities   454   463 
Accrued employee costs  267   214 
Other current liabilities  677   562 
Current portion of long-term debt   34   33   70   104 
Total current liabilities   1,154   1,134   1,995   2,039 
Noncurrent liabilities:        
Long-term debt, less current portion   5,502   5,608   10,690   11,261 
Deferred income taxes   276   419   673   803 
Employee benefit obligations  307   327 
Operating lease liabilities  468   — 
Other long-term liabilities   314   300   729   421 
Total liabilities   7,246   7,461   14,862   14,851 
                
Stockholders' equity        
        
Common stock (131.1 and 130.9 million shares issued, respectively)  1   1 
Stockholders' equity:        
Common stock (132.7 and 132.3 million shares issued, respectively)  1   1 
Additional paid-in capital   831   823   1,005   949 
Non-controlling interest   3   3 
Retained earnings  419   256   1,413   1,054 
Accumulated other comprehensive loss   (80)  (68)  (550)  (386)
Total stockholders' equity  1,174   1,015   1,869   1,618 
Total liabilities and stockholders' equity $8,420  $8,476  $16,731  $16,469 

See notes to consolidated financial statements.


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BerryBerry Global Group, Inc.
Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)
(in millions of dollars)

 
Quarterly Period Ended
 
Common
Stock
  
Additional
Paid-in Capital
  
Accumulated Other
Comprehensive Loss
  
Retained
Earnings
  Total 
Balance at March 28, 2020 $1  $976  $(548) $1,222  $1,651 
Net income  —   —   —   191   191 
Other comprehensive loss  —   —   (2)  —   (2)
Share-based compensation  —   4   —   —   4 
Proceeds from issuance of common stock  —   3   —   —   3 
Acquisition(a)
  —   22   —   —   22 
Balance at June 27, 2020 $1  $1,005  $(550) $1,413  $1,869 
                     
Balance at March 30, 2019 $1  $904  $(186) $812  $1,531 
Net income  —   —   —   13   13 
Other comprehensive loss  —   —   (25)  —   (25)
Share-based compensation  —   4   —   —   4 
Proceeds from issuance of common stock  —   23   —   —   23 
Common stock repurchased and retired  —   —   —   —   — 
Balance at June 29, 2019 $1  $931  $(211) $825  $1,546 

 
Three Quarterly Periods Ended
 
Common
Stock
  
Additional
Paid-in Capital
  
Accumulated Other
Comprehensive Loss
  
Retained
Earnings
  Total 
Balance at September 28, 2019 $1  $949  $(386) $1,054  $1,618 
Net income  —   —   —   364   364 
Other comprehensive loss  —   —   (164)  —   (164)
Share-based compensation  —   28   —   —   28 
Proceeds from issuance of common stock  —   6   —   —   6 
Acquisition(a)
  —   22   —   —   22 
Adoption of lease accounting standard  —   —   —   (5)  (5)
Balance at June 27, 2020 $1  $1,005  $(550) $1,413  $1,869 
                     
Balance at September 29, 2018 $1  $870  $(156) $719  $1,434 
Net income  —   —   —   175   175 
Other comprehensive loss  —   —   (55)  —   (55)
Share-based compensation  —   21   —   —   21 
Proceeds from issuance of common stock  —   43   —   —   43 
Common stock repurchased and retired  —   (3)  —   (69)  (72)
Balance at June 29, 2019 $1  $931  $(211) $825  $1,546 

(a)Represents noncontrolling interest (see Note 4).

See notes to consolidated financial statements.

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

 Quarterly Period Ended  Three Quarterly Periods Ended 
 December 30, 2017  December 31, 2016  June 27, 2020  June 29, 2019 
Cash Flows from Operating Activities:            
Net income $163  $51  
$
364  $175 
Adjustments to reconcile net cash provided by operating activities:                
Depreciation   91   87   412   278 
Amortization of intangibles   38   33   226   119 
Non-cash interest expense   3   1 
Non-cash interest  18   (4)
Loss on foreign exchange forward contracts  —   156 
Deferred income tax   (121)  14   30   (16)
Stock compensation expense   4   3 
Share-based compensation expense  28   21 
Other non-cash operating activities, net   6   (1)  23   9 
Changes in working capital   (66)  (43)  (93)  (169)
Changes in other assets and liabilities   35   (2)  (29)  2 
Net cash from operating activities   153   143   979   571 
                
Cash Flows from Investing Activities:                
Additions to property, plant and equipment   (94)  (65)
Proceeds from sale of assets   3   2 
Other investing activities, net  —   (1)
Additions to property, plant and equipment, net  (419)  (271)
Settlement of net investment hedges  281   — 
Other investing activities  (14)  2 
Net cash from investing activities  (91)  (64)  (152)  (269)
                
Cash Flows from Financing Activities:                
Proceeds from long-term borrowings  1,202   — 
Repayments on long-term borrowings   (108)  (10)  (1,859)  (383)
Proceeds from issuance of common stock   4   5   6   43 
Repurchase of common stock  —   (74)
Payment of tax receivable agreement   (37)  (60)  —   (16)
Debt financing costs  (16)  — 
Net cash from financing activities   (141)  (65)  (667)  (430)
Effect of exchange rate changes on cash   1   (6)  (4)  2 
Net change in cash   (78)  8   156   (126)
Cash and cash equivalents at beginning of period   306   323   750   381 
Cash and cash equivalents at end of period  $228  $331  $906  $255 

See notes to consolidated financial statements.



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7
Berry Global Group, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
(tables in millions of dollars, except per share data)

1. Basis of Presentation

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 toThe Company has recast certain prior periodsperiod amounts to conform withto 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


2.  Recent 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 2018,2020, with the exception of the below, there have been no developments to the recently adopted accounting pronouncements from those disclosed in the Company's 20172019 Annual Report on Form 10-K that are considered to have a material impact on our unaudited consolidated financial statements.


Revenue RecognitionLeases

In May 2014,Effective September 29, 2019, the Financial Accounting Standards Board (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 plans to adopt the new standard, which at a minimum will result in expanded revenue disclosures,adopted ASU 2016-02, Leases (Topic 842), including all related amendments, using the modified retrospective approach and recognized the cumulative effect of adoption to retained earnings. Under the new standard, the lessee of an operating lease is currently evaluatingrequired to: 1) recognize a right-of-use asset and a lease liability in the impactstatement of financial position, 2) recognize a single lease cost allocated over the lease term generally on a straight-line basis, and 3) classify all cash payments within operating activities on the statement of cash flows. See Note 6. Leases for more information.

Credit Losses

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) and issued subsequent amendments to the consolidatedinitial guidance. The new standard requires entities to measure all expected credit losses for most financial statementsassets held at the reporting date based on an expected loss model, which includes historical experience, current conditions, and reasonable and supportable forecasts. The new standard also requires enhanced disclosure. The new standard will be effective for the Company beginning fiscal 2021. The Company is in fiscal 2019.the process of evaluating this new standard, however, the Company does not anticipate this to have a material impact.


HedgesDefined Benefit Plans


In August 2017,2018, 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 changes2018-14, Changes to the designation and measurement guidance.Disclosure Requirements for Defined Benefit Plans. The new guidance isstandard removes requirements to disclose the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year and the effects of a one-percentage-point changes in assumed health care cost trend rates. The standard also adds requirements to disclose the reasons for significant gains and losses related to changes in the benefit obligations for the period and the accumulated benefit obligation ("ABO") for plans with ABOs in excess of plan assets. The new standard will be effective for interim and annual periodsthe Company 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.2022. The Company has chosen to early adopt this guidance for fiscal 2018, andis currently evaluating the impact of the adoption of this guidance did not have a material impact on any of its active hedges.standard to our disclosures.


3.Acquisitions
Income Taxes
AEP Industries Inc.


In January 2017,December 2019, the FASB issued ASU 2019-12, Income Taxes - Simplifying the Accounting for Income Taxes (Topic 740). The new guidance eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. The new standard will be effective for the Company acquired AEP Industries Inc. ("AEP") for a purchase price of $791 million, net of cash acquired.  A portionbeginning fiscal 2022. The Company is currently evaluating the impact of the purchase price consistedadoption of issuing 6.4 millionthis standard to our disclosures.

8
Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform - Facilitation of Berry common shares which were valued at $324 million at the timeEffects of closing.  AEP manufacturesReference Rate Reform on Financial Reporting (Topic 848). This standard provides temporary optional expedients and markets an extensiveexceptions to the GAAP guidance on contract modifications and diverse linehedge accounting to ease the financial reporting burdens of polyethylenethe expected market transition from LIBOR and polyvinyl chloride flexibleother interbank offered rates to alternative reference rates, such as SOFR. ASU 2020-04 is effective upon issuance and generally can be applied through the end of calendar year 2022. The Company is currently evaluating the impact and whether it plans to adopt the optional expedients and exceptions provided under this new standard.


3.  Revenue and Accounts Receivable


Our revenues are primarily derived from the sale of plastic packaging products for consumer, industrial, and agricultural applications.  The acquired businessto customers. Revenue is operatedrecognized when performance obligations are satisfied, in our Engineered Materials segment.  To financean amount reflecting the purchase,consideration to which the Company expects to be entitled. We consider the promise to transfer products to be our sole performance obligation.  If the consideration agreed to in a contract includes a variable amount, we estimate the amount of consideration we expect to be entitled to in exchange for transferring the promised goods to the customer using the most likely amount method. Our main source of variable consideration are customer rebates.  The accrual for customer rebates was $93 million and $114 million at June 27, 2020 and September 28, 2019, respectively, and is included in Other current liabilities on the Consolidated Balance Sheets. The Company disaggregates revenue based on reportable business segment, geography, and significant product line.  Refer to Note 10. Segment and Geographic Data for further information.


The Company has entered into an incremental assumption agreementvarious qualifying factoring agreements to increase the commitments under the Company's existing term loan credit agreement by $500 million due 2024.

7
sell certain receivables to third-party financial institutions. The acquisition has beentransfer of receivables is accounted for as a sale, without recourse. Net sales available under qualifying U.S. based programs were $242 million and $241 million for the purchase methodquarterly period ended June 27, 2020 and June 29, 2019, respectively. Net sales available under qualifying U.S. based programs were $700 million and $656 million for the three quarterly periods ended June 27, 2020 and June 29, 2019, respectively. There were 0 amounts outstanding from financial institutions related to these programs. The fees associated with the transfer of accounting,receivables for all programs were not material for any of the periods presented.


4.  Acquisitions and accordingly,Dispositions

RPC Group Plc

In July 2019, the purchase price has been allocated to the identifiable assets and liabilities based on fair values atCompany completed the acquisition date.of the entire outstanding share capital of RPC Group Plc (“RPC”), for aggregate consideration of $6.1 billion. RPC is a leading plastic product design and engineering company for packaging and select non-packaging markets, with 189 sites in 34 countries. RPC develops and manufactures a diverse range of products for a wide variety of customers, including many household names, and enjoys strong market positions in many of the end markets it serves and the geographical areas in which it operates. It uses a wide range of polymer conversion techniques in both rigid and flexible plastics manufacture, and is one of the largest plastic converters in Europe. The international based facilities are operated within the Consumer Packaging International segment with the remaining U.S. based facilities operated within the Consumer Packaging North America segment.  The results of AEPRPC have been included in the consolidated results of the Company since the date of the acquisition.  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 allocation of purchase price and the fair values of the assets acquired and liabilities assumed at the date of the acquisition:

Working capital (a) $139 
Property and equipment  223 
Intangible assets  214 
Goodwill  347 
Historical AEP debt assumed  (7)
Other assets and long-term liabilities  (125)
(a) Includes a $5 million step up of inventory to fair value 


Unaudited pro forma netNet sales and netoperating income were $1.8 billion and $51 million, respectively,of RPC included in the Consolidated Statements of Income for the quarterly period ended December 31, 2016.June 27, 2020 were $1,092 million and $111 million, respectively. The unaudited pro formamajority of RPC activity for the quarter ended June 27, 2020, net sales of $968 million and netoperating 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$90 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 Materialsthe Consumer Packaging International segment. Net sales and operating income of RPC included in the Consolidated Statements of Income for the three quarterly periods ended June 27, 2020 were $3,346 million and $245 million, respectively. The majority of RPC activity for the three quarterly periods ended June 27, 2020, net sales of $2,972 million and operating income of $196 million, is operated in the Consumer Packaging International segment.

The acquisition has been accounted for under the purchase method of accounting and accordingly,accounting. Under this method, the purchase price has been allocated to the identifiable assets and liabilities based on preliminary estimates of fair value at the acquisition date.  The results of Adchem have been included in the consolidated results of the Company since the date of the acquisition.  The Company has not finalized the allocations of the purchase price to the fair value of deferred taxes (including assessment of uncertain tax positions), fixed assets, and certain working capital accounts.  The assets acquired and liabilities assumed consistedhave been recorded based on fair values as of working capital of $10 million, property and equipment of $2 million, intangible assets of $22 million, and goodwill of $15 million.the acquisition date. The Company has recognized Goodwillgoodwill on this transaction primarily as a result of expected cost synergies, and expects Goodwillgoodwill to be partially deductible for tax purposes.

4. Accounts Receivable Factoring Agreements

The preliminary purchase price allocation has been updated for certain measurement period adjustments based on the final valuation resulting in a $70 million increase in working capital, a $224 million decrease in property, plant and equipment, a $135 million decrease in customer relationships, a $93 million increase in trade names, a $67 million decrease in deferred tax liabilities, and a $22 million increase in noncontrolling interest. These adjustments resulted in corresponding increases to goodwill.

9
The following table summarizes the final purchase price allocation (in millions):

Consideration   
Cash $6,084 
Total consideration transferred  6,084 
     
Identifiable assets acquired and liabilities assumed    
Working capital(a)
  770 
Property, plant and equipment  2,151 
Identifiable intangible assets  1,670 
Other assets  2 
Other long-term liabilities  (859)
Goodwill  2,372 
Net assets acquired and liabilities assumed  6,106 
Noncontrolling interest  (22)
Total consideration transferred $6,084 
(a) Includes a $58 million step up of inventory to fair value
 

To finance the purchase, the Company hasissued $1,250 million aggregate principal amount of first priority senior secured notes due 2026, $500 million aggregate principal amount of second priority senior secured notes due 2027, and entered into various factoring agreements, both inincremental term loans due July 2026, to fund the U.S. and at a numberremainder 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 allowsthe purchase price.

When including RPC results 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 supportperiods prior to the purchaser of the receivables once the receivables are sold.

Thereacquisition date, unaudited pro forma net sales and net income were no amounts outstanding from financial institutions related to U.S. based programs at December 30, 2017 or September 30, 2017.  Gross amounts factored under these U.S. based programs at December 30, 2017$3.3 billion and September 30, 2017 were $118$38 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 and facility exit costs of $11 million and $4 millionrespectively, for the quarterly period ended June 29, 2019 and $9.6 billion and $217 million, respectively, for the three quarterly periods ended December 30, 2017June 29, 2019. The unaudited pro forma net sales and December 31, 2016, respectively.  net income assume that the RPC acquisition had occurred as of the beginning of the period.

Seal For Life

In July 2019, the Company completed the sale of its Seal For Life ("SFL") business which was operated in our Health, Hygiene & Specialties reporting segment for net proceeds of $325 million. SFL recorded $96 million in net sales during fiscal 2019.

5.  Restructuring and Transaction Activities

The costs incurred in the quarter relate primarily to severance charges associated with acquisition integrations.  The tablestable below set forthincludes the significant components of the restructuring charges recognized,and transaction activities, by reporting segment:

 Quarterly Period Ended  Quarterly Period Ended  Three Quarterly Periods Ended 
 December 30, 2017  December 31, 2016  June 27, 2020  June 29, 2019  June 27, 2020  June 29, 2019 
Consumer Packaging  $1  $2 
Consumer Packaging International $14  $2  $37  $6 
Consumer Packaging North America  2   6   6   14 
Engineered Materials  2   —   6   5 
Health, Hygiene & Specialties   10   2   1   (8)  6   10 
Engineered Materials   —   — 
Consolidated  $11  $4  $19  $—  $55  $35 

8

The table below sets forth the activity with respect to the restructuring and transaction activities accrual at December 30, 2017:June 27, 2020:


 Employee Severance and Benefits  
Facility Exit
Costs
  Total  Restructuring       
Balance at September 30, 2017 $14  $5  $19 
 
Employee Severance
and Benefits
  
Facility
Exit Costs
  
Non-cash
Impairment Charges
  
Transaction
Activities
  Total 
Balance as of September 28, 2019 $2  $5  $—  $—  $7 
Charges   10   1   11   24   1   2   28   55 
Non-cash items  —   —   (2)  —   (2)
Cash payments   (7)  (1)  (8)  (17)  (2)  —   (28)  (47)
Balance at December 30, 2017 $17  $5  $22 
Balance as of June 27, 2020 $9  $4  $—  $—  $13 
6.Accrued Expenses, Other Current Liabilities and Other Long-Term Liabilities

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6.  Leases

During the first quarter of fiscal 2020, the Company adopted ASU 2016-02, Leases (Topic 842). The following table sets forthCompany leases certain manufacturing facilities, warehouses, office space, manufacturing equipment, office equipment, and automobiles.

Under the totalsnew standard, we recognize right-of-use assets and lease liabilities for leases with original lease terms greater than one year based on the present value of lease payments over the lease term using our incremental borrowing rate on a collateralized basis.  Short-term leases, with original lease terms of less than one year, are not recognized on the balance sheet. We are party to certain leases, namely for manufacturing facilities, which offer renewal options to extend the original lease term. Renewal options are included in Accrued expensesthe right-of-use asset and other currentlease liability based on our assessment of the probability that the options will be exercised.

We have elected the package of practical expedients which allows the Company to not reassess: (i) whether any expired or existing contracts are or contain leases, (ii) lease classification for any expired or existing leases, and (iii) initial direct costs for any existing leases. Additionally, we have elected the practical expedient to not separate lease and non-lease components for all asset classes.

Supplemental lease information is as follows:

LeasesClassification June 27, 2020 
Assets    
Operating lease right-of-use assetsRight-of-use assets $563 
Finance lease right-of-use assetsProperty, plant, and equipment  88 
Current liabilities     
Operating lease liabilitiesOther current liabilities $111 
Finance lease liabilitiesCurrent portion of long-term debt  17 
Non-current liabilities     
Operating lease liabilitiesOperating lease liabilities $468 
Finance lease liabilitiesLong-term debt, less current portion  71 

Lease cost 
Quarterly Period Ended
June 27, 2020
  
Three Quarterly Periods Ended
June 27, 2020
 
Operating lease cost $29  $86 
Finance lease cost:        
Amortization of right-of-use assets  3   11 
Interest on lease liabilities  1   3 
Total finance lease cost  4   14 
Short-term lease cost  3   11 
Total lease cost $36  $111 

Cash paid for amounts included in lease liabilities 
Three Quarterly Periods Ended
June 27, 2020
 
Operating cash flows from operating leases $86 
Operating cash flows from finance leases  3 
Financing cash flows from finance leases  25 

June 27, 2020
Weighted-average remaining lease term - operating leases8 years
Weighted-average remaining lease term - finance leases4 years
Weighted-average discount rate - operating leases4.6%
Weighted-average discount rate - finance leases3.7%

Right-of-use assets obtained in exchange for new operating lease liabilities onwere $2 million and $15 million for the Consolidated Balance Sheets:quarterly and three quarterly periods ended June 27, 2020, respectively.

  December 30, 2017  September 30, 2017 
Employee compensation $122  $147 
Accrued taxes  107   90 
Rebates  59   58 
Interest   34   36 
Tax receivable agreement obligation  24   35 
Restructuring  22   19 
Accrued operating expenses  86   78 
  $454  $463 
The following table sets forth the totals included in Other long-term liabilities on the Consolidated Balance Sheets:
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  December 30, 2017  September 30, 2017 
Pension liability  $53  $56 
Deferred purchase price  46   46 
Lease retirement obligation  42   37 
Transition tax  36   — 
Interest rate swaps  26   27 
Sale-lease back deferred gain  23   24 
Tax receivable agreement obligation  13   34 
Other   75   76 
  $314  $300 
At June 27, 2020, annual lease commitments were as follows:

Fiscal Year Operating Leases  Finance Leases 
Remainder of 2020 $35  $8 
2021  108   22 
2022  100   26 
2023  85   16 
2024  70   6 
Thereafter  303   15 
Total lease payments  701   93 
Less: Interest  (122)  (5)
Present value of lease liabilities $579  $88 

7.  Long-Term Debt

Long-term debt consists of the following:

 Maturity Date December 30, 2017   September 30, 2017 
Term loan February 2020 $900  $1,000 
FacilityMaturity Date June 27, 2020  September 28, 2019 
Term loan January 2021  814   814 October 2022 $1,545  $1,545 
Term loan October 2022  1,645   1,645 January 2024  450   489 
Term loanJanuary 2024  496   498 July 2026  4,218   4,250 
Revolving line of credit May 2020  —   — May 2024  —   — 
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 NotesOctober 2022  400   400 
5.50% Second Priority Senior Secured NotesMay 2022  150   500 
6.00% Second Priority Senior Secured NotesOctober 2022  200   400 
5.125% Second Priority Senior Secured NotesJuly 2023  700   700 
1.00% First Priority Senior Secured Notes(a)
July 2025  786   — 
4.50% Second Priority Senior Secured NotesFebruary 2026  500   500 
4.875% First Priority Senior Secured NotesJuly 2026  1,250   1,250 
5.625% Second Priority Senior Secured NotesJuly 2027  500   500 
1.50% First Priority Senior Secured Notes(a)
July 2027  421   — 
Debt discounts and deferred fees    (46)  (48)   (92)  (112)
Capital leases and other Various  127   132 
Finance leases and otherVarious  132   167 
Retired debt   —   1,176 
Total long-term debt    5,536   5,641    10,760   11,365 
Current portion of long-term debt    (34)  (33)   (70)  (104)
Long-term debt, less current portion  $5,502  $5,608   $10,690   11,261 

9(a)  Euro denominated

In January 2020, the Company (i) issued €700 million aggregate principal amount of 1.00% first priority senior secured notes due 2025 and €375 million aggregate principal amount of 1.50% first priority senior secured notes due 2027 (the “Euro notes”) and (ii) refinanced its existing $4.25 billion Term loan maturing in July 2026, resulting in a 50 basis point interest rate reduction. The proceeds of the Euro notes were used to prepay the entire outstanding amount of our existing euro denominated Term loan. Debt extinguishment costs of $18 million, primarily comprised of deferred debt discount and financing fees, were recorded in Other expense, net on the Consolidated Statements of Income upon the extinguishment of the euro Term loan.

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, net on the Consolidated Statements of Income through maturity.

Term Loans


In November 2017, the Company executed an amendment to lower interest rates under certain term loans.  The term loans maturing in February 20208.  Financial Instruments and January 2021 bear interest at LIBOR plus 2.00% with no LIBOR floor.  The term loans maturing in October 2022 and January 2024 bear interest at LIBOR plus 2.25% with no LIBOR floor.Fair Value Measurements
During fiscal 2018, the Company has made $108 million of repayments on long-term borrowings using existing liquidity.  As a result of the current year prepayments and modifications, the Company recorded a $1 million loss on debt extinguishment in Other expense (income), net, reflecting the write-off of deferred financing fees and debt discounts, net of amortization associated with the portion of debt that was considered extinguished.
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

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Cross-Currency Swaps

The Company is party to certain cross-currency swaps to hedge a portion of our foreign currency risk. The swap agreements mature May 2022 (€250 million), June 2024 (€1,625 million) and July 2027 (£700 million). In addition to cross-currency swaps, we hedge a portion of our foreign currency risk by designating foreign currency denominated long-term debt as net investment hedges of certain foreign operations. As of June 27, 2020, we had outstanding long-term debt of €785 million that arewas 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 aour net investment in certain euro-denominated foreign subsidiaries. When valuing cross-currency swaps the Company utilizes Level 2 inputs (substantially observable).

During fiscal 2020, the Company entered into transactions to cash settle existing cross-currency swaps and received proceeds of $281 million. The swap settlement impact has been included as a foreign operation.

To the extent hedging relationships are found to be effective, as determined by FASB guidance, changes in the fair valuecomponent of the derivatives are offset by changes in the fair value of the related hedged item and recorded toCurrency translation within Accumulated other comprehensive loss. Any identified ineffectiveness, or changes inFollowing the fair valuesettlement of a derivative not designated as a hedge, is recorded to the Consolidated Statements of Income.

Cross-Currency Swaps

In November 2017, the Companyexisting cross-currency swaps, we entered into certainnew cross-currency swap agreementsswaps with amatching 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 currenciesamounts and reduce the variability in the functional currency cash flows of a portionmaturity dates 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.original swaps.


Interest Rate Swaps


The primary purpose of the Company'sCompany’s interest rate swap activities is to manage cash flowinterest expense variability associated with our outstanding variable rate term loan debt.
In February 2013, When valuing interest rate swaps the Company entered into a $1 billion interest rate swap transaction with an effective dateutilizes Level 2 inputs (substantially observable).

As 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.

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.
At December 30, 2017,27, 2020, 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 2.00%1.398%, with an effective date in May 2017 and expiration in May 2022,June 2026, (ii) a $1 billion interest rate swap transaction that swaps a one-month variable LIBOR contract for a fixed annual rate of 1.5190%1.835% with an effective date in March 2017 and expiration in June 2019,2026, (iii) a $1 billion$400 million interest rate swap transaction that swaps a one-month variable LIBOR contract for a fixed annual rate of 2.0987%1.916% with an effective date in February 2017 and expiration in September 2021.June 2026, (iv) a $884 million interest rate swap transaction that swaps a one-month variable LIBOR contract for a fixed annual rate of 1.857%, with an expiration in June 2024, and (v) a $473 million interest rate swap transaction that swaps a one-month variable LIBOR contract for a fixed annual rate of 2.050%, with an expiration in June 2024.

10

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:

Derivatives InstrumentsHedge DesignationBalance Sheet Location December 30, 2017  September 30, 2017 
Derivative InstrumentsHedge DesignationBalance Sheet Location June 27, 2020  September 28, 2019 
Cross-currency swapsDesignatedOther assets $—  $88 
Cross-currency swapsDesignatedOther long-term liabilities $15  $— DesignatedOther long-term liabilities  153   — 
Interest rate swapsDesignatedOther assets  7   1 DesignatedOther long-term liabilities  228   81 
Interest rate swapsNot designatedOther assets  8   13 
Interest rate swapsDesignatedOther long-term liabilities  1   15 
Interest rate swaps Not designatedOther long-term liabilities  10   13 

The effect of the Company's derivative instruments on the Consolidated Statements of Income is as follows:

   Quarterly Period Ended  Quarterly Period Ended  Three Quarterly Periods Ended 
Derivatives instrumentsStatement of Operations LocationDecember 30, 2017 December 31, 2016 
Derivative Instruments
 Statements of Income Location
 June 27, 2020  June 29, 2019  June 27, 2020  June 29, 2019 
Cross-currency swapsInterest expense, net $(1) $— Interest expense, net $(2) $(2) $(5) $(5)
Foreign currency swaps Other expense (income), net  —   1 
Cross-currency swapsOther expense, net  —   18   —   18 
Foreign exchange forward contractsOther expense, net  —   120   —   138 
Interest rate swapsInterest expense, net  2   5 Interest expense, net  13   (4)  17   (13)
The amortization related to unrealized losses in Accumulated other comprehensive loss is expected to be $2 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 or when the Company completes an acquisition. The Company adjusts certain long-lived assets to fair value only when the carrying values exceed the fair values. The categorization of the framework used to value the assets is considered Level 3, due to the subjective nature of the unobservable inputs used to determine the fair value. These assets that are subject to our annual impairment analysis primarily include 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 20172019 assessment. An incrementalWhile impairment indicators were not identified during the quarter that warranted impairment testing, the ongoing COVID-19 pandemic has created market volatility which we believe is short-term in nature. However, if we experience sustained earnings decline of 10-15% in the Health, Hygiene & Specialties - South America reporting unit, or future declines in our peer companies, market capitalizations, or total enterprise value, as well as lower valuation market multiples, could impactsustained lower earnings, or escalating macroeconomic challenges, the need for future impairment tests.tests may arise.


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Included in the following table are the major categories of assets measured at fair value on a non-recurring basis as of December 30, 2017June 27, 2020 and September 30, 2017,28, 2019, along with the impairment loss recognized on the fair value measurement during the period:

 As of December 30, 2017  As of June 27, 2020 
 Level 1  Level 2  Level 3  Total  Impairment  Level 1  Level 2  Level 3  Total  Impairment 
Indefinite-lived trademarks $—  $—  $248  $248  $—  $—  $—  $248  $248  $— 
Goodwill   —   —   2,777   2,777   —   —   —   5,184   5,184   — 
Definite lived intangible assets  —   —   999   999   —   —   —   2,288   2,288   — 
Property, plant, and equipment  —   —   2,363   2,363   —   —   —   4,481   4,481   2 
Total  $—  $—  $6,387  $6,387  $—  $—  $—  $12,201  $12,201  $2 

 As of September 30, 2017  As of September 28, 2019 
 Level 1  Level 2  Level 3  Total  Impairment  Level 1  Level 2  Level 3  Total  Impairment 
Indefinite-lived trademarks $—  $—  $248  $248  $—  $—  $—  $248  $248  $— 
Goodwill   —   —   2,775   2,775   —   —   —   5,051   5,051   — 
Definite lived intangible assets  —   —   1,038   1,038   —   —   —   2,532   2,532   — 
Property, plant, and equipment  —   —   2,366   2,366   2   —   —   4,714   4,714   8 
Total  $—  $—  $6,427  $6,427  $2  $—  $—  $12,545  $12,545  $8 

The Company's financial instruments consist primarily of cash and cash equivalents, long-term debt, interest rate and cross-currency swap agreements, and capitalfinance lease obligations. The fairbook value of our marketable long-term indebtedness exceeded bookfair value by $61$31 million as of December 30, 2017.June 27, 2020. The Company's long-term debt fair values were determined using Level 2 inputs as other significant observable inputs were not available.


119.  Income Taxes
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.  The estimated impact of the corporate income tax net reduction along with the transitional taxes, discussed below, were recordedcomparison to the Consolidated Statements of Income in the quarter.

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 basestatutory rate, of 21%.  These transitional impacts resulted in a provisional transition benefit of $95 million for the 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.  After exclusion of this benefit, the effective tax rate was 26% for the Quarterquarter and year-to-date was positivelymodestly impacted by 3% from the share-based compensation excess tax benefit deduction 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, 1% from higherglobal intangible low-taxed income provisions (GILTI), uncertain tax rates in foreign jurisdictions,positions and other discrete items.

The changes included in the Tax Act are broad
10.  Segment 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.Geographic Data

10. Operating Segments

The Company's operations are organized into three operating4 reporting segments: Consumer Packaging International, Consumer Packaging North America, Engineered Materials, and Health, Hygiene & Specialties, and Consumer Packaging.Specialties.  The structure is designed to align us with our customers, provide optimal service, and drive future growth, in a cost efficient manner.  and to facilitate synergies realization.

Selected information by reportable segment is presented in the following tables:


 Quarterly Period Ended  Quarterly Period Ended  Three Quarterly Periods Ended 
 December 30, 2017  December 31, 2016  June 27, 2020  June 29, 2019  June 27, 2020  June 29, 2019 
Net sales:                  
Consumer Packaging International $1,020  $52  $3,125  $153 
Consumer Packaging North America  718   652   2,104   1,892 
Engineered Materials  $648  $383   564   630   1,747   1,910 
Health, Hygiene & Specialties   577   570   608   603   1,725   1,904 
Consumer Packaging   551   549 
Total net sales  $1,776  $1,502  $2,910  $1,937  $8,701  $5,859 
Operating income:                        
Consumer Packaging International $89  $(1) $195  $(2)
Consumer Packaging North America  93   73   226   168 
Engineered Materials  $88  $53   81   83   239   250 
Health, Hygiene & Specialties   37   59   84   60   170   160 
Consumer Packaging   38   34 
Total operating income $163  $146  $347  $215  $830  $576 
Depreciation and amortization:                        
Consumer Packaging International $79  $4  $240  $12 
Consumer Packaging North America  62   50   190   156 
Engineered Materials  $29  $17   25   27   80   87 
Health, Hygiene & Specialties   46   44   43   46   128   142 
Consumer Packaging   54   59 
Total depreciation and amortization $129  $120  $209  $127  $638  $397 


  December 30, 2017  September 30, 2017 
Total assets:      
Engineered Materials $1,753  $1,803 
Health, Hygiene & Specialties   3,475   3,496 
Consumer Packaging   3,192   3,177 
Total assets  $8,420  $8,476 
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14
Selected information by geographygeographical region is presented in the following tables:

 Quarterly Period Ended 
 December 30, 2017 December 31, 2016 
Net sales:    
North America $1,466  $1,204 
South America  74   80 
Europe  170   149 
Asia  66   69 
Total net sales $1,776  $1,502 
         
 December 30, 2017 September 30, 2017 
Long-lived assets:        
North America $5,313  $5,350 
South America  358   371 
Europe  470   467 
Asia  298   284 
Total long-lived assets: $6,439  $6,472 
 Quarterly Period Ended  Three Quarterly Periods Ended 
  June 27, 2020  June 29, 2019  June 27, 2020  June 29, 2019 
Net sales:            
United States and Canada $1,430  $1,556  $4,648  $4,672 
Europe  1,172   200   3,156   614 
Rest of world  308   181   897   573 
Total net sales $2,910  $1,937  $8,701  $5,859 


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


 Quarterly Period Ended  Quarterly Period Ended  Three Quarterly Periods Ended 
 December 30, 2017  December 31, 2016  June 27, 2020  June 29, 2019  June 27, 2020  June 29, 2019 
Net sales:                  
Performance Materials  45   73 
Engineered Products  55   27 
Packaging  84   100   82   100 
Non-packaging  16   —   18   — 
Consumer Packaging International  100%  100%  100%  100%
                
Rigid Open Top  44   47   45   45 
Rigid Closed Top  56   53   55   55 
Consumer Packaging North America  100%  100%  100%  100%
                
Core Films  38   40   38   40 
Retail & Industrial  62   60   62   60 
Engineered Materials  100%  100%  100%  100%  100%  100%
                     
Health  19   20   22   15   19   15 
Hygiene  44   46   52   52   53   54 
Specialties  37   34   26   33   28   31 
Health, Hygiene & Specialties  100%  100%  100%  100%  100%  100%
     
Rigid Open Top  43   42 
Rigid Closed Top  57   58 
Consumer Packaging  100%  100%
Goodwill  


The changes in the carrying amount of goodwill by reportable segment are as follows: 11.  Contingencies and Commitments
  Engineered Materials  
Health, Hygiene
& Specialties
  Consumer Packaging  Total 
Balance as of September 30, 2017 $545  $819  $1,411  $2,775 
Acquisitions, net  4   —   —   4 
Foreign currency translation adjustment  —   (2)  —   (2)
Balance as of December 30, 2017 $549  $817  $1,411  $2,777 


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 believeswe believe that any ultimate liability would not be material to itsour financial statements.

The Company has various purchase commitments for raw materials, supplies, and property and equipment incidental to the ordinary conduct of business.

1312.  Share Repurchase Program

NaN shares were repurchased during the three quarterly periods ended June 27, 2020.  Authorized share repurchases of $393 million remain available to the Company.

12. Basic and Diluted Net Income Per Share

13.  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 noFor the three and nine months ended June 27, 2020, 7.1 million and 7.1 million shares, respectively, were excluded from the calculationsdiluted net income per share calculation as thetheir effect of their conversion into shares of our common stock would be antidilutive.anti-dilutive.

15
The following tables provide a reconciliation of the numerator and denominator of the basic and diluted net income per share calculations.

 Quarterly Period Ended  Quarterly Period Ended  Three Quarterly Periods Ended 
(in millions, except per share amounts) December 30, 2017  December 31, 2016  June 27, 2020  June 29, 2019  June 27, 2020  June 29, 2019 
Numerator                  
Consolidated net income $163  $51  $191  $13  $364  $175 
Denominator                        
Weighted average common shares outstanding - basic  131.0   122.0   132.5   131.5   132.4   131.0 
Dilutive shares  5.0   5.8   1.7   2.7   1.9   3.0 
Weighted average common and common equivalent shares outstanding - diluted  136.0   127.8   134.2   134.2   134.3   134.0 
                        
Per common share income                        
Basic $1.24  $0.42  $1.44  $0.10  $2.75  $1.34 
Diluted $1.20  $0.40  $1.42  $0.10  $2.71  $1.31 
13. 
14.  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   (24)  (1)  14   (11)
Net amount reclassified from accumulated other comprehensive income (loss)    —   —   3   3 
Provision for income taxes  —   —   (4)  (4)
Balance at December 30, 2017 $(72) $(17) $9  $(80)
Quarterly Period Ended 
Currency
Translation
  
Defined Benefit
Pension and Retiree
Health Benefit Plans
  
Derivative
Instruments
  
Accumulated Other
Comprehensive Loss
 
Balance at March 28, 2020 $(344) $(57) $(147) $(548)
Other comprehensive income (loss), net of tax before reclassifications  11   —   (23)  (12)
Net amount reclassified from accumulated other comprehensive loss  —   —   10   10 
Balance at June 27, 2020 $(333) $(57) $(160) $(550)


  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   (45)  —   12   (33)
Net amount reclassified from accumulated other comprehensive income (loss)    —   —   5   5 
Provision for income taxes  —   —   (6)  (6)
Balance at December 31, 2016 $(127) $(44) $(11) $(182)
  
Currency
Translation
  
Defined Benefit
Pension and Retiree
Health Benefit Plans
  
Derivative
Instruments
  
Accumulated Other
Comprehensive Loss
 
Balance at March 30, 2019 $(173) $(13) $—  $(186)
Other comprehensive income (loss), net of tax before reclassifications  10   —   (32)  (22)
Net amount reclassified from accumulated other comprehensive loss  —   —   (3)  (3)
Balance at June 29, 2019 $(163) $(13) $(35) $(211)

Three Quarterly Periods Ended 
Currency
Translation
  
Defined Benefit
Pension and Retiree
Health Benefit Plans
  
Derivative
Instruments
  
Accumulated Other
Comprehensive Loss
 
Balance at September 28, 2019 $(279) $(56) $(51) $(386)
Other comprehensive loss, net of tax before reclassifications  (54)  (1)  (126)  (181)
Net amount reclassified from accumulated other comprehensive loss  —   —   17   17 
Balance at June 27, 2020 $(333) $(57) $(160) $(550)

  
Currency
Translation
  
Defined Benefit
Pension and Retiree
Health Benefit Plans
  
Derivative
Instruments
  
Accumulated Other
Comprehensive Loss
 
Balance at September 29, 2018 $(175) $(13) $32  $(156)
Other comprehensive income (loss), net of tax before reclassifications  12   —   (59)  (47)
Net amount reclassified from accumulated other comprehensive loss  —   —   (8)  (8)
Balance at June 29, 2019 $(163) $(13) $(35) $(211)


14
16
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

  December 30, 2017 
  Parent  Issuer  
Guarantor
Subsidiaries
  
Non—
Guarantor
Subsidiaries
  Eliminations  Total 
Current assets  —   126   1,127   728   —   1,981 
Intercompany receivable  334   2,286   —   —   (2,620)  — 
Property, plant, and equipment, net  —   73   1,564   726   —   2,363 
Other assets  1,152   5,401   4,555   528   (7,560)  4,076 
Total assets $1,486  $7,886  $7,246  $1,982  $(10,180) $8,420 
                         
Current liabilities  24   279   560   291   —   1,154 
Intercompany payable  —   —   2,571   49   (2,620)  — 
Other long-term liabilities  288   5,649   90   65   —   6,092 
Stockholders' equity  1,174   1,958   4,025   1,577   (7,560)  1,174 
Total liabilities and stockholders' equity $1,486  $7,886  $7,246  $1,982  $(10,180) $8,420 

  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 
15
Condensed Supplemental Consolidated Statements of Operations

  Quarterly Period Ended December 30, 2017 
  Parent  Issuer  
Guarantor
Subsidiaries
  
Non-
Guarantor
Subsidiaries
  Eliminations  Total 
Net sales $—  $138  $1,225  $413  $—  $1,776 
Cost of goods sold  —   106   989   352   —   1,447 
Selling, general and administrative  —   12   80   25   —   117 
Amortization of intangibles  —   —   31   7   —   38 
Restructuring and impairment charges  —   —   7   4   —   11 
Operating income  —   20   118   25   —   163 
Other expense (income), net  —   5   7   (3)  —   9 
Interest expense, net  —   5   43   14   —   62 
Equity in net income of subsidiaries  (92)  (72)  —   —   164   — 
Income before income taxes  92   82   68   14   (164)  92 
Income tax expense  (71)  (81)  —   10   71   (71)
Consolidated net income $163  $163  $68  $4  $(235) $163 
Comprehensive net income $163  $160  $68  $(5) $(235) $151 
                         
Consolidating Statement of Cash Flows                        
Cash Flow from Operating Activities $—  $35  $139  $(21) $—  $153 
Cash Flow from Investing Activities                        
Additions to  property, plant, and equipment  —   (3)  (61)  (30)  —   (94)
Proceeds from sale of assets  —   —   —   3   —   3 
(Contributions) distributions to/from subsidiaries  (4)  4   —   —   —   — 
Intercompany advances (repayments)  —   69   —   —   (69)  — 
Net cash from investing activities  (4)  70   (61)  (27)  (69)  (91)
                         
Cash Flow from Financing Activities                        
Repayments on long-term borrowings  —   (106)  (2)  —   —   (108)
Proceeds from issuance of common stock  4   —   —   —   —   4 
Payment of tax receivable agreement  (37)  —   —   —   —   (37)
Changes in intercompany balances  37   —   (86)  (20)  69   — 
Net cash from financing activities  4   (106)  (88)  (20)  69   (141)
                         
Effect of exchange rate changes on cash  —   —   —   1   —   1 
                         
Net change in cash  —   (1)  (10)  (67)  —   (78)
Cash and cash equivalents at beginning of period  —   18   12   276   —   306 
Cash and cash equivalents at end of period $—  $17  $2  $209  $—  $228 

  Quarterly Period Ended December 31, 2016 
  Parent  Issuer  
Guarantor
Subsidiaries
  
Non—
Guarantor
Subsidiaries
  Eliminations  Total 
Net sales $—  $143  $979  $380  $—  $1,502 
Cost of goods sold  —   116   789   301   —   1,206 
Selling, general and administrative  —   42   75   (4)  —   113 
Amortization of intangibles  —   2   25   6   —   33 
Restructuring and impairment charges  —   —   4   —   —   4 
Operating income (loss)  —   (17)  86   77   —   146 
Other income, net  —   4   —   (5)  —   (1)
Interest expense, net  —   6   45   17   —   68 
Equity in net income of subsidiaries  (79)  (92)  —   —   171   — 
Income before income taxes  79   65   41   65   (171)  79 
Income tax expense  28   14   —   14   (28)  28 
Consolidated net income $51  $51  $41  $51  $(143) $51 
Comprehensive net income $51  $62  $41  $6  $(143) $17 
16
                         
Consolidating Statement of Cash Flows                        
Cash Flow from Operating Activities $—  $(19) $120  $42  $—  $143 
Cash Flow from Investing Activities                        
Additions to property, plant, and equipment  —   (2)  (50)  (13)  —   (65)
Proceeds from sale of assets  —   1   1   —   —   2 
(Contributions) distributions to/from subsidiaries  (5)  5   —   —   —   — 
Intercompany advances (repayments)  —   39   —   —   (39)  — 
Other investing activities, net  —   (1)  —   —   —   (1)
Net cash from investing activities  (5)  42   (49)  (13)  (39)  (64)
                         
Cash Flow from Financing Activities                        
Repayments on long-term borrowings  —   (9)  (1)  —   —   (10)
Proceeds from issuance of common stock  5   —   —   —   —   5 
Payment of tax receivable agreement  (60)  —   —   —   —   (60)
Changes in intercompany balances  60   —   (67)  (32)  39   — 
Net cash from financing activities  5   (9)  (68)  (32)  39   (65)
                         
Effect of exchange rate changes on cash  —   —   —   (6)  —   (6)
                         
Net change in cash  —   14   3   (9)  —   8 
Cash and cash equivalents at beginning of period  —   102   5   216   —   323 
Cash and cash equivalents at end of period $—  $116  $8  $207  $—  $331 

15. Subsequent Events

In January 2018, the Company issued $500 million aggregate principal amount of 4.50% second priority senior secured notes due 2026 (the "Notes") through a private placement offering.  The net proceeds from the Notes were used to fund the acquisition of Clopay Plastic Products Company, Inc. ("Clopay").

In February 2018, the Company acquired Clopay for a purchase price of $475 million, which is preliminary and subject to adjustment.  Clopay manufactures printed breathable films and is an innovator in the development of 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.  Clopay will be operated within the Health, Hygiene and Specialties segment.
17
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the consolidated financial statements of Berry Global Group, Inc. and its subsidiaries and the accompanying notes thereto, which information is included elsewhere herein. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in our most recent Form 10-K in the section titled "Risk Factors", Item 1A of the our Quarterly Report on Form 10-Q for the quarter ended March 28, 2020, and other risk factors identified from time to time in our subsequent periodic filings with the Securities and Exchange Commission. As a result, our actual results may differ materially from those contained in any forward-looking statements. The forward-looking statements referenced within this report should be read with the explanation of the qualifications and limitations included herein. Fiscal 20172019 and fiscal 20182020 are fifty-two week periods.

Executive Summary

COVID-19.  The ongoing pandemic has impacted various businesses and supply chains, including travel restrictions and the extended shutdown of certain industries in various countries. Due to the nature of the majority of our products, geographic footprint and end market diversity, on a consolidated net sales basis we have been modestly impacted with lower customer demand in food service and industrials being offset by higher consumer demand in our healthcare, hygiene and food product categories. Additionally, the impact of travel and safety restriction related to the pandemic has negatively impacted various integration activities and back office functions. The Company will continue to evaluate the potential impacts and closely monitor developments as they arise.

Business. The Company's operations are organized into three operatingfour reporting segments: Consumer Packaging International, Consumer Packaging North America, Engineered Materials and Health, Hygiene & Specialties, and Consumer Packaging.Specialties. The structure is designed to align us with our customers, provide optimal service, and drive future growth, in a cost efficient manner.and to facilitate synergies realization. The Consumer Packaging International segment primarily consists of containers, closures, dispensing systems, pharmaceutical devices and packaging, polythene films, and technical components and includes the international portion of the recently acquired RPC Group Plc (“RPC”) business. The Consumer Packaging North America segment primarily consists of containers, foodservice items, closures, overcaps, bottles, prescription vials, and tubes. The Engineered Materials segment primarily consists of tapes and adhesives, polyethylene basedpolyethylene-based film products, can liners, printed films, and specialty coated and laminated products. The Health, Hygiene & Specialties segment primarily consists of nonwoven specialty materials and films used in hygiene, infection prevention, personal care, industrial, construction, and filtration applications.  The Consumer Packaging segment primarily consists of containers, foodservice items, closures, overcaps, bottles, prescription containers, and tubes.


Acquisitions.  Our acquisition strategy is focused on improving our long-term financial performance, enhancing our market positions, and expanding our existing and complementary product lines. We seek to obtain businesses for attractive post-synergy multiples, creating value for our stockholders from synergy realization, leveraging the acquired products across our customer base, creating new platforms for future growth, and assuming best practices from the businesses we acquire.  While the expected benefits on earnings is estimated at the commencement of each transaction, once the execution of the plan and integration occur, we are generally unable to accurately estimate or track what the ultimate effects have been due to system integrations and movements of activities to multiple facilities. As historical business combinations and restructuring plans have not allowed us to accurately separate realized synergies compared to what was initially identified, we measure the synergy realization based on the overall segment profitability post integration.


AEP Industries Inc.RPC Group Plc

In January 2017,July 2019, the Company acquired AEP Industries Inc. ("AEP")completed the acquisition of RPC for aggregate consideration of $6.1 billion. RPC is a leading plastic product design and engineering company for packaging and select non-packaging markets, with 189 sites in 34 countries. RPC develops and manufactures a diverse range of products for a purchase pricewide variety of $791 million, net of cash acquired.  A portioncustomers, including many household names, and enjoys strong market positions in many of the purchase price consistedend markets it serves and the geographical areas in which it operates. It uses a wide range 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 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.  The Company expects annual cost synergies of approximately $80 million from the AEP transaction with full realization expected in fiscal 2018.

Adchem Corp.

In June 2017, the Company acquired Adchem Corp.'s ("Adchem") tapes business for a purchase price of $49 million.  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.  To finance the purchase, the Company used existing liquidity.   

Clopay Plastic Products Company, Inc.
In February 2018, the Company acquired Clopay for a purchase price of $475 million, which is preliminary and subject to adjustment.  Clopay manufactures printed breathable filmspolymer conversion techniques and is an innovatoralso one of the largest plastic recyclers in the development of 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.  Clopay will beEurope. The international based facilities are operated within the Health, Hygiene and SpecialtiesConsumer Packaging International segment with the remaining U.S. based facilities operated within the Consumer Packaging North America segment. The Company expects to realize annual cost synergies of approximately $20$150 million fromof which an estimated $85 million is expected to be realized in fiscal 2020.  See Note 4 to the completionConsolidated Financial Statements for further details on the acquisition of the Clopay transaction.  To finance the purchase,RPC.

Seal For Life

In July 2019, the Company usedcompleted the sale of our Seal For Life ("SFL") business which was operated in our Health, Hygiene & Specialties segment for net proceeds from the $500of $325 million. SFL recorded $96 million Notes (see footnote 15).in net sales during fiscal 2019.


17
Raw Material Trends. Our primary raw material is plastic resin. Polypropylene and polyethylene account for approximately 90% of our plastic resin consisting primarily of polypropylene and polyethylene. Plastic resins are subject to price fluctuations, including those arising from supply shortages and changes in the prices of natural gas, crude oil and other petrochemical intermediates from which resins are produced.pounds purchased.  The three month simple average price per pound, as published by U.S. market indexes, wasindices, were as follows:

  Polyethylene Butene Film  Polypropylene 
  2020  2019  2018  2020  2019  2018 
1st quarter $.58  $.64  $.68  $.58  $.76  $.71 
2nd quarter  .59   .61   .69   .53   .63   .75 
3rd quarter  .56   .63   .68   .48   .62   .76 
4th quarter  —   .59   .66   —   .62   .85 
18
  Polyethylene Butene Film  Polypropylene 
  2018  2017  2016  2018  2017  2016 
1st quarter $.87  $.75  $.69  $.84  $.69  $.70 
2nd quarter  —   .77   .66   —   .80   .75 
3rd quarter  —   .79   .73   —   .74   .71 
4th quarter  —   .81   .75   —   .75   .71 

Due to differences in the timing of passing through resin cost changes to our customers on escalator/de-escalator programs, segments are negatively impacted in the short term when plastic resin costs increase and are positively impacted when plastic resin costs decrease. This timing lag inand competitor behaviors related to passing through raw material cost changes could affect our results as plastic resin costs fluctuate.

Outlook.The Company is impactedaffected by general economic and industrial growth, plastic resin availability and affordability, and general industrial production. Our business has both geographic and end-marketend market diversity, which reduces the effect of any one of these factors on our overall performance. Our results are affected by our ability to pass through raw material and other cost changes to our customers, improve manufacturing productivity and adapt to volume changes of our customers.  Wecustomers, including those changes being impacted by the current COVID-19 pandemic. Based on current market conditions we believe there are long term growth opportunities within the health, pharmaceuticals, personal careportions of our Consumer Packaging segments and food packaging markets existing in developing countries, where expected per capita consumption increases should result in organic market growth.  In addition, while weour Engineered Materials segment will continue to see volume pressure in the near-term as they are more highly indexed to food service and industrials markets. We also believe that long term dynamicsour Health, Hygiene, & Specialties segment will continue to have strong volumes for the duration of the resin markets will be an advantage to Berry, the short term challenges to regional transportation systems and higher raw material prices in partfiscal 2020 as a result of resin supply disruptions,strong demand for healthcare products. We continue to believe our underlying long-term demand fundamentals in all divisions remain intact as well as macroeconomic pressures in South America could create short-term headwinds for early fiscal 2018.we continue our focus on delivering protective solutions that enhance consumer safety and execute on the Company’s mission statement of “Always Advancing to Protect What’s Important”. For fiscal 2018, including the impact from the recent Clopay transaction,2020, we project cash flow from operations and adjusted free cash flow of $1,007$1,450 million and $630$830 million, respectively. Our fiscal 2018 projections assume negative $40 million in working capital due to the recent raw material inflation, $340The free cash flow assumes an estimated $620 million of capital spending, andcash taxes of $170 million, cash interest costs of $250 million.  Within our adjusted free cash flow guidance, we are also assuming cash taxes to be $160$430 million, including the $37 million payment made in the first quarter under the Company's tax receivable agreement and an estimated $50 million of cash tax savings related to the Tax Cuts and Jobs Act ( the "Tax Act"), along with other cash uses of $50 million related to items such aschanges in working capital, acquisition integration expenses and costs to achieve synergies. For the definition of Adjusted free cash flow and further information related to Adjusted free cash flow as a non-GAAP financial measure, see "Liquidity“Liquidity and Capital Resources."Resources”.

Results of Operations
 
Comparison of the Quarterly Period Ended December 30, 2017June 27, 2020 (the "Quarter") and the Quarterly Period Ended December 31, 2016June 29, 2019 (the "Prior Quarter")

Acquisition (businesses acquired in the last twelve months) sales and operating income disclosed within this section represents the results from acquisitions for the current period.  Business integration expenses consist of restructuring and impairment charges, acquisition related costs, and other business optimization costs.  Tables present dollars in millions.

Consolidated Overview                 
Quarter Prior Quarter $ Change % Change  Quarter  Prior Quarter  $ Change  % Change 
Net sales $1,776  $1,502  $274   18% $2,910  $1,937  $973   50%
Operating income $163  $146  $17   12% $347  $215  $132   61%
Operating income percentage of net sales  9%  10%          12%  11%        

The net sales increase of $274 million from Prior Quartergrowth is primarily attributed to acquisition net sales of $267$1,092 million an $18 million favorable impact from currency translation, and a base volume increase of 2%. These increases inwere partially offset by lower selling prices of $99 million due to the pass through of higherlower resin prices.  These increase are partially offset bycosts, a 1% base volume decline.$19 million unfavorable impact from foreign currency changes and Prior Quarter divestiture sales of $34 million.


The operating income increase of $17 million from Prior Quarter is primarily attributed to acquisition operating income of $26$111 million, a $34 million favorable impact from cost productivity and product mix, a $12 million increase due to the base volume growth, and a $6 million decrease in depreciation and amortization. These improvements were partially offset by a $10 million increase in business integration costs, a $5 million unfavorable impact from foreign currency changes and Prior Quarter divestiture operating income of $9 million.

Consumer Packaging International         
  Quarter  Prior Quarter  $ Change  % Change 
Net sales $1,020  $52  $968   — 
Operating income (loss) $89  $(1) $90   — 
Operating income percentage of net sales  9%  (2)%        

The net sales and operating income growth in the Consumer Packaging International segment is primarily attributed to the RPC acquisition.
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Consumer Packaging North America         
  Quarter  Prior Quarter  $ Change  % Change 
Net sales $718  $652  $66   10%
Operating income $93  $73  $20   27%
Operating income percentage of net sales  13%  11%        

The net sales growth in the Consumer Packaging North America segment is primarily attributed to acquisition net sales of $117 million related to the U.S. portion of the acquired RPC business, partially offset by lower selling prices of $51 million due to the pass through of lower resin costs.

The operating income increase is primarily attributed to acquisition operating income of $19 million.

Engineered Materials         
  Quarter  Prior Quarter  $ Change  % Change 
Net sales $564  $630  $(66)  (10)%
Operating income $81  $83  $(2)  (2)%
Operating income percentage of net sales  14%  13%        

The net sales decrease in the Engineered Materials segment is primarily attributed to a 8% base volume decline reflecting the impact of COVID-19 and lower selling prices of $24 million due to the pass through of lower resin costs, partially offset by acquisition net sales of $7 million.

The operating income decrease is primarily attributed to a $6 million unfavorable impact from the base volume decline, partially offset by cost productivity and a decrease in depreciation and amortization.

Health, Hygiene & Specialties         
  Quarter  Prior Quarter  $ Change  % Change 
Net sales $608  $603  $5   1%
Operating income $84  $60  $24   40%
Operating income percentage of net sales  14%  10%        

The net sales growth in the Health, Hygiene & Specialties segment is primarily attributed to base volume growth of 14%, partially offset by lower selling prices of $24 million due to the pass through of lower resin costs, a $19 million unfavorable impact from foreign currency changes, and Prior Quarter sales of $34 million related to the divested SFL business.

The operating income increase is primarily attributed to a $28 million favorable impact from cost productivity and product mix and an $18 million favorable impact from the base volume increase. These increases were partially offset by a $9 million increase in business integration costs, a $5 million unfavorable impact from foreign currency changes, and Prior Quarter operating income of $9 million related to the divested SFL business.

Other (income) expense, net         
  Quarter  Prior Quarter  $ Change  % Change 
Other (income) expense, net $(7) $136  $(143)  (105)%

The other (income) expense improvement is primarily attributed to non-recurring, unfavorable foreign currency changes related to the foreign exchange forward contracts entered into as a part of the RPC acquisition in the Prior Quarter.

Interest expense, net         
  Quarter  Prior Quarter  $ Change  % Change 
Interest expense, net $110  $71  $39   55%

The interest expense increase is primarily attributed to the incremental debt facilities entered into as part of the RPC acquisition.

Income tax expense (benefit)         
  Quarter  Prior Quarter  $ Change  % Change 
Income tax expense (benefit) $53  $(5) $58   — 

The income tax expense increase is primarily attributed to higher pre-tax book income and the Prior Quarter included a loss on foreign exchange forward contracts resulting in a $30 million income tax benefit.

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Changes in Comprehensive Income

The $201 million improvement in comprehensive income from the Prior Quarter was primarily attributed to a $178 million improvement in net income and a $22 million favorable change in the fair value of derivative instruments, net of tax. As part of the overall risk management, the Company uses derivative instruments to (i) reduce our exposure to changes in interest rates attributed to the Company’s borrowings and (ii) reduce foreign currency exposure to translation of certain foreign operations. The Company records changes to the fair value of these instruments in Accumulated other comprehensive loss.  The change in fair value of these instruments in fiscal 2020 versus fiscal 2019 is primarily attributed to the change in the forward interest and foreign exchange curves between measurement dates.

Comparison of the Three Quarterly Periods Ended June 27, 2020 (the "YTD") and the Three Quarterly Periods Ended June 29, 2019 (the "Prior YTD")

Acquisition sales and operating income disclosed within this section represents the results from acquisitions for the current period.  Business integration expenses consist of restructuring and impairment charges, acquisition related costs, and other business optimization costs.  Tables present dollars in millions.

Consolidated Overview         
  YTD  Prior YTD  $ Change  % Change 
Net sales $8,701  $5,859  $2,842   49%
Operating income $830  $576  $254   44%
Operating income percentage of net sales  10%  10%        

The net sales growth is primarily attributed to acquisition net sales of $3,346 million and an $11a base volume increase of 1%, partially offset by lower selling prices of $429 million due to the pass through of lower resin costs, Prior YTD divestiture sales of $86 million and a $32 million unfavorable impact from foreign currency changes.

The operating income increase is primarily attributed to acquisition operating income of $245 million, a $22 million decrease in depreciation and amortization, a $16 million favorable impact from the base volume increase, and a $7 million decrease in business integration costs. These improvements were partially offset by a $9 million increase in selling, general and administrative expenses and Prior YTD divestiture operating income of $25 million.

Consumer Packaging International         
  YTD  Prior YTD  $ Change  % Change 
Net sales $3,125  $153  $2,972   — 
Operating income $195  $(2) $197   — 
Operating income percentage of net sales  6%  (1)%        

The net sales and operating income growth in the Consumer Packaging International segment is attributed to the RPC acquisition.

Consumer Packaging North America         
  YTD  Prior YTD  $ Change  % Change 
Net sales $2,104  $1,892  $212   11%
Operating income $226  $168  $58   35%
Operating income percentage of net sales  11%  9%        

The net sales growth in the Consumer Packaging North America segment is primarily attributed to acquisition net sales of $356 million related to the U.S. portion of the acquired RPC business and a 1% base volume improvement, partially offset by lower selling prices of $161 million due to the pass through of lower resin costs.

The operating income increase is primarily attributed to acquisition operating income of $47 million and an $8 million favorable impact from cost reductions,productivity and product mix.
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Engineered Materials         
  YTD  Prior YTD  $ Change  % Change 
Net sales $1,747  $1,910  $(163)  (9)%
Operating income $239  $250  $(11)  (4)%
Operating income percentage of net sales  14%  13%        

The net sales decrease in the Engineered Materials segment is primarily attributed to lower selling prices of $123 million due to the pass through of lower resin costs and a $73% base volume decline as a result of COVID-19, partially offset by acquisition net sales of $18 million.

The operating income decrease is primarily attributed to a $12 million unfavorable impact from price cost spread and an $8 million unfavorable impact from the base volume decline, partially offset by an $8 million decrease in depreciation and amortization.

Health, Hygiene & Specialties         
  YTD  Prior YTD  $ Change  % Change 
Net sales $1,725  $1,904  $(179)  (9)%
Operating income $170  $160  $10   6%
Operating income percentage of net sales  10%  8%        

The net sales decrease in the Health, Hygiene & Specialties segment is primarily attributed to lower selling prices of $145 million due to the pass through of lower resin costs and Prior YTD sales of $86 million related to the divested SFL business, partially offset by a 5% base volume increase.

The operating income increase is primarily attributed to a $23 million favorable impact from the base volume increase, a $9 million favorable impact from cost productivity and product mix, and a $10 million decrease in depreciation and amortization. These increases arewere partially offset by an $18Prior YTD operating income of $25 million unfavorable impact from under recovery of higher cost of goods sold, a $5 million increase in business integration and restructuring costs, and a $4 million unfavorable impact fromrelated to the volume decline.
Engineered Materials        
 Quarter Prior Quarter $ Change % Change 
Net sales $648  $383  $265   69%
Operating income $88  $53  $35   66%
Percentage of net sales  14%  14%        
divested SFL business.

Other expense, net         
  YTD  Prior YTD  $ Change  % Change 
Other expense, net $6  $159  $(153)  (105)%
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Net salesOther expense in the Engineered Materials segment increased by $265YTD includes $26 million from Prior Quarterof debt extinguishment costs, primarily attributed to acquisition net salesa result of $267 million and a $6 million increase in selling prices due to the pass throughprepayment of higher resin prices,the entire outstanding amount of our existing euro denominated term loan, partially offset by a 2% base volume decline.
favorable foreign currency changes associated with the remeasurement of non-operating intercompany balances. The operating income increase of $35 million from Prior Quarter isYTD primarily attributed to acquisition operating income of $26 million, a $4 million favorable impact from improvement in price cost spread, and a $4 million decrease in depreciation and amortization.
Health, Hygiene & Specialties        
 Quarter Prior Quarter $ Change % Change 
Net sales $577  $570  $7   1%
Operating income $37  $59  $(22)  (37%)
Percentage of net sales  6%  10%        
Net sales in the Health, Hygiene & Specialties segment increased by $7 million from Prior Quarter primarily attributed to a $16 million favorable impact from currency translation, partially offset by a 1% base volume decline. 
The operating income decrease of $22 million from Prior Quarter is primarily attributed to a $17 million negative impact from under recovery of higher cost of goods sold related to inflation and market pressure in South America, a $6 million increase in business integration and restructuring costs, and a slight increase in depreciation and amortization expense, partially offset by a $4 million decrease in selling, general and administrative expenses.
Consumer Packaging        
 Quarter Prior Quarter $ Change % Change 
Net sales $551  $549  $2   0%
Operating income $38  $34  $4   12%
Percentage of net sales  7%  6%        
Net sales in the Consumer Packaging segment increased by $2 million from Prior Quarter primarily attributed to an $8 million impact from selling price increases due to the pass through of higher resin prices, partially offset by a 1% base volume decline.
The operating income increase of $4 million from Prior Quarter is primarily attributed to a $5 million decrease in depreciation and amortization expense and a $5 million decrease in selling, general and administrative expense, partially offset by a $5 million unfavorable impact from under recovery of higher cost of goods sold.
Other expense (income), net        
 Quarter Prior Quarter $ Change % Change 
Other expense (income), net $9  $(1) $10   1,000%
The other expense (income), net increase of $10 million from Prior Quarter is primarily attributed to a $4 million tax receivable agreement revaluation as a result of tax reform, a $3 million loss on asset disposal in the Quarter andcontains non-recurring, unfavorable foreign currency changes related to the remeasurementforeign exchange forward contracts entered into as a part of non-operating intercompany balances.the RPC acquisition.

Interest expense, net                 
Quarter Prior Quarter $ Change % Change  YTD  Prior YTD  $ Change  % Change 
Interest expense, net $62  $68  $(6)  (9%) $339  $201  $138   69%

The interest expense decrease of $6 million from Prior Quarterincrease is primarily attributed to lower interest rates on our term loansthe incremental debt facilities entered into as a resultpart of term loan modifications and reduced indebtedness.the RPC acquisition.


Income tax expense (benefit)        
 Quarter Prior Quarter $ Change % Change 
Income tax expense (benefit) $(71) $28  $(99)  (354%)
Income tax expense         
  YTD  Prior YTD  $ Change  % Change 
Income tax expense $121  $41  $80   195%

The income tax expense (benefit) decrease of $99 million from the Prior Quarterincrease is primarily attributed to higher pre-tax book income and the $95Prior YTD included a loss on foreign exchange forward contracts resulting in a $30 million provisional transition benefit recorded in the Quarter as a result of the recent U.S.income tax legislation more fully described in footnote 9. After exclusion of the transitional benefit, the effective tax rate was 26% for the Quarter and was positively impacted by 3% from the share-based compensation excess tax benefit deduction 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, 1% from higher tax rates in foreign jurisdictions, and other discrete items.benefit.

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Changes in Comprehensive Income (Loss)

The $134$80 million improvement in Comprehensivecomprehensive income (loss) from the Prior Quarter isYTD was primarily attributed to a $112$189 million improvement in Netnet income, andpartially offset by a $21$66 million favorableunfavorable change in currency translation which isand a $42 million unfavorable change in the fair value of derivative instruments, net of a negative $15 million related to the cross-currency swap.tax. Currency translation gains and losses are primarily related to non-U.S. subsidiaries with a functional currency other than U.S. Dollarsdollars whereby assets and liabilities are translated from the respective functional currency into U.S. Dollarsdollars using period-end exchange rates. The change in currency translation in the QuarterYTD was primarily attributed to locations utilizing the euro, British pound sterling, Brazilian real, Canadian dollar, Chinese renminbi and Mexican peso as the functional currency. As part of the overall risk management, the Company uses derivative instruments to (i) reduce our exposure to (i) changes in interest rates attributed to the Company's floating-rateCompany’s borrowings and (ii) reduce foreign currency risk relatedexposure to net investmentstranslation of certain foreign operations. The Company records changes to the fair value of these instruments in foreign subsidiaries.Accumulated other comprehensive loss.  The change in fair value of these instruments is included in Accumulated other comprehensive loss.  The $2 million favorable change in fair value of these instruments in the Quarterfiscal 2020 versus Prior Quarterfiscal 2019 is primarily attributed to an increasethe change in the forward interest curveand foreign exchange curves between measurement dates.


Liquidity and Capital Resources
 
Senior Secured Credit Facility

We manage our global cash requirements considering (i) available funds among the many subsidiaries through which we conduct business, (ii) the geographic location of our liquidity needs, and (iii) the cost to access international cash balances.  We have a $750 million asset-based revolving line of credit that matures in May 2020.  At the end of the Quarter, the Company had no outstanding balance on theits $850 million asset-based revolving line of credit facility.that matures in May 2024. The Company was in compliance with all covenants at the end of the Quarter (see footnote 7 to the Notes to the Consolidated Financial Statements incorporated herein)Note 7).

Cash Flows

Net cash from operating activities increased $10$408 million from the Prior QuarterYTD primarily attributed to improved net income before depreciation, amortization and the net impact of the recently announced U.S. tax legislation, partially offset by an increase in working capital dueprior to higher raw material costs.non-cash activities.

Net cash fromused in investing activities increased $27decreased $117 million from the Prior QuarterYTD primarily attributed to proceeds from the settlement of cross-currency derivatives partially offset by increased capital expenditures compared toas a result of the Prior Quarter.RPC acquisition.


Net cash fromused in financing activities increased $76$237 million from the Prior QuarterYTD primarily attributed to increasedhigher net debt repayments on our term loans partially offset by lower tax receivable agreement payments.share repurchase activity.


Adjusted Share Repurchases

No shares were repurchased during the quarter. Authorized share repurchases of $393 million remain available to the Company.

Free Cash Flow

We define "Adjusted free"Free cash flow" as cash flow from operating activities less net additions to property, plant and equipment and payments of the tax receivable agreement.equipment.


Based on our definition, our consolidated adjusted freeFree cash flow is summarized as follows:


 Quarterly Period Ended  Three Quarterly Periods Ended 
 December 30, 2017  December 31, 2016  June 27, 2020 
Cash flow from operating activities $153  $143  $979 
Additions to property, plant and equipment, net  (91)  (63)  (419)
Payments of tax receivable agreement  (37)  (60)
Adjusted free cash flow $25  $20 
Free cash flow $560 


Adjusted freeFree cash flow, as presented in this document, is a supplemental financial measure that is not required by, or presented in accordance with, generally accepted accounting principles in the U.S. ("GAAP").  Adjusted freeFree cash flow is not a GAAP financial measure and should not be considered as an alternative to cash flow from operating activities or any other measure determined in accordance with GAAP.  We use Adjusted freeFree cash flow as a measure of liquidity because it assists us in assessing our company'scompany’s ability to fund its growth through its generation of cash, and believe it is useful to investors for such purpose.  In addition, Adjusted freeFree cash flow and similar measures are widely used by investors, securities analysts and other interested parties in our industry to measure a company's liquidity.  Adjusted freeFree cash flow may be calculated differently by other companies, including other companies in our industry, limiting its usefulness as a comparative measure.


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Liquidity Outlook

At December 30, 2017,June 27, 2020, our cash balance was $228$906 million, of which approximately 90%60% was located outside the U.S.  We believe our existing U.S. based cash and cash flow from U.S. operations, together with available borrowings under our senior secured credit facilities, will be adequate to meet our liquidity needs over the next twelve months.  We do not expect our free cash flow to be sufficient to cover all long-term debt obligations and intend to refinance these obligations prior to maturity.  However, we cannot predict our future results of operations and our ability to meet our obligations involves numerous risks and uncertainties, including, but not limited to, those described in the "Risk Factors"“Risk Factors” section of our most recent Form 10-K filed with the Securities and Exchange Commission and in this Form 10-Q, if any.


Summarized 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 section, “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 summarized financial information for the Parent, Issuer and guarantor subsidiaries on a combined basis, after intercompany transactions have been eliminated.

  Three Quarterly Periods Ended 
  June 27, 2020 
Net sales $4,361 
Gross profit  932 
Earnings from continuing operations  189 
Net income $189 

Includes $20 million of income associated with intercompany activity with non-guarantor subsidiaries.

  June 27, 2020  September 28, 2019 
Assets      
Current assets $1,674  $1,237 
Noncurrent assets  6,339   5,088 
         
Liabilities        
Current liabilities $915  $862 
Noncurrent liabilities  12,391   11,915 

Includes $475 million of intercompany payables due to non-guarantor subsidiaries as of June 27, 2020 and $45 million of intercompany receivables due from non-guarantor subsidiaries as of September 28, 2019.

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Item 3.Quantitative and Qualitative Disclosures about Market Risk

Interest Rate SensitivityRisk

We are exposed to market risk from changes in interest rates primarily through our senior secured credit facilities. At December 30, 2017, ourOur senior secured credit facilities are comprised of (i) $3.9$6.2 billion term loans and (ii) a $750$850 million revolving credit facility with no borrowings outstanding. Borrowings under our senior secured credit facilities bear interest at a rate equal to an applicable margin plus LIBOR.  The applicable margin for LIBOR rate borrowings under the revolving credit facility ranges from 1.25% to 1.75%1.50%, and the margin for the term loans range fromis 2.00% to 2.25% per annum with a 0% LIBOR floor.  At December 30, 2017,annum. As of period end, the LIBOR rate of approximately 1.56%0.18% was applicable to the term loans. A 0.25% change in LIBOR would increase our annual interest expense by $4$8 million on variable rate term loans.


We seek to minimize interest rate volatility risk through regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. These financial instruments are not used for trading or other speculative purposes.
As of December 30, 2017, At period end, 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 2.00%1.398%, with an effective date in May 2017 and expiration in May 2022,June 2026, (ii) a $1 billion interest rate swap transaction that swaps a one-month variable LIBOR contract for a fixed annual rate of 1.5190%1.835% with an effective date in March 2017 and expiration in June 2019,2026, (iii) a $1 billion$400 million interest rate swap transaction that swaps a one-month variable LIBOR contract for a fixed annual rate of 2.0987%1.916% with an effective date in February 2017 and expiration in September 2021.June 2026, (iv) a $884 million interest rate swap transaction that swaps a one-month variable LIBOR contract for a fixed annual rate of 1.857%, with an expiration in June 2024, and (v) a $473 million interest rate swap transaction that swaps a one-month variable LIBOR contract for a fixed annual rate of 2.050%, with an expiration in June 2024.


Foreign Currency Exchange RatesRisk

As a global company, we face foreign currency risk exposure from fluctuating currency exchange rates, primarily the U.S. dollar against the euro, British pound sterling, Brazilian real, Argentine peso, Chinese yuan,renminbi, Canadian dollar and Mexican peso.  Significant fluctuations in currency rates can have a substantial impact, either positive or negative, on our revenue, cost of sales, and operating expenses.  Currency translation gains and losses are primarily related to non-U.S. subsidiaries with a functional currency other than U.S. dollars whereby assets and liabilities are translated from the respective functional currency into U.S. dollars using period-end exchange rates and impact our Comprehensive income.  A 10% decline in foreign currency exchange rates would have had a negative $6$20 million unfavorable impact on our Net Income.income for the three quarterly periods ended June 27, 2020.


In November 2017, theThe Company entered intois party to certain cross-currency swap agreements with a notional amount of 250 million euroswaps to effectively converthedge a portion of our fixed-rate U.S. dollar denominated term loans, including the monthly interest payments, to fixed rate euro-denominated debt.foreign currency risk. The swap agreements mature May 2022.  The risk management objective is2022 (€250 million), June 2024 (€1,625 million) and July 2027 (£700 million). In addition 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 ofcross-currency swaps, we hedge a portion of the Company's term loans.  In the future, we may attempt to manage our foreign currency risk on our anticipated cash movements by entering intodesignating foreign currency forward contracts to offset potentialdenominated long-term debt as net investment hedges of certain foreign exchange gains or losses.
operations. As of June 27, 2020, we had outstanding long-term debt of €785 million that was designated as a hedge of our net investment in certain euro-denominated foreign subsidiaries.

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Item 4.
Controls and Procedures

Item 4.  Controls and Procedures
(a)Evaluation of disclosure controls and procedures.

(a) Evaluation of disclosure controls and procedures.

Under applicable Securities and Exchange Commission regulations, management of a reporting company, with the participation of the principal executive officer and principal financial officer, must periodically evaluate the company's "disclosure controls and procedures," which are defined generally as controls and other procedures of a reporting company designed to ensure that information required to be disclosed by the reporting company in its periodic reports filed with the commission (such as this Form 10-Q) is recorded, processed, summarized, and reported on a timely basis.

The Company's management, with the participation of the Chief Executive Officer and the Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the disclosure controls and procedures as of December 30, 2017.the end of the period covered by this report.  Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of December 30, 2017, the design and operation of our disclosure controls and procedures were effective at the reasonable assurance level.level as of the end of the period covered by this report.

(b)(b) Changes in internal controls.

The impact of travel and safety restriction related to the COVID-19 pandemic has negatively impacted various integration activities including the ongoing process of implementing standardized internal control procedures over financial reporting within the recently acquired RPC business. We will continue to evaluate the potential impacts and closely monitor developments as they arise and will continue to respond accordingly.

There were no other changes in our internal control over financial reporting that occurred during the quarter ended December 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



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Part II.  Other Information

Item 1.
Item 1.  Legal Proceedings

There have been no material changes in legal proceedings from the items disclosed in our Form 10-K filed with the Securities and Exchange Commission.

Item 1A.
Item 1A.  Risk Factors

Before investing in our securities, we recommend that investors carefully consider the risks described in our most recent Form 10-K filed with the Securities and Exchange Commission and our Quarterly Report on Form 10-Q for the quarter ended March 28, 2020, including those under the heading "Risk Factors" and other information contained in this Quarterly Report.  Realization of any of these risks could have a material adverse effect on our business, financial condition, cash flows and results of operations.  In addition

The ongoing COVID-19 pandemic could continue to have an adverse impact on our business, financial condition, liquidity, and results of operations, which may be material.

The ongoing COVID-19 pandemic has impacted demand for some of our products and we may not be successful in allocating resources to address rapidly shifting demand among our product lines. Additionally, the impact of travel and safety restrictions related to the Company's risk factorsCOVID-19 pandemic has had and is expected to continue to have an adverse effect on certain integration activities, including the ongoing process of implementing standardized internal control procedures within the recently acquired RPC business. The extent to which the ongoing COVID-19 pandemic adversely impacts our business, financial condition, liquidity and results of operations will depend on future developments that are highly uncertain and cannot be predicted, including, but not limited to, the duration of the pandemic, the severity of the COVID-19 virus, potential actions taken by various governmental authorities in response to the pandemic, and the timing of recovery of the global economy. As a result, we cannot at this time predict the overall impact of the COVID-19 pandemic, but it could have a material adverse impact on our business, financial condition, liquidity, and results of operations. To the extent the COVID-19 pandemic adversely affects our business, financial condition, liquidity, or results of operations, it may also have the effect of heightening many of the other risks described in the “Risk Factors” section of our most recent Form 10-K filed with the Securities and Exchange Commission, investors should consider the following risk factor.10-K.

The final impacts of the Tax Cuts and Jobs Act could be materially different from our current estimates.

The Tax Cuts and Jobs Act was signed into law in December 2017. The new law made numerous changes to federal corporate tax law that we expect will significantly reduce our effective tax rate in future periods.  The changes included in the Tax Act are broad and complex. The final transition impacts of the Tax Act may differ from our current estimates, 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.


Forward-looking Statements and Other Factors Affecting Future Results.


All forward-looking information and subsequent written and oral forward-looking statements attributable to us, or to persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements. Some of the factors that we believe could affect our results include:

●risks associated with our substantial indebtedness and debt service;
●changes in prices and availability of resin and other raw materials and our ability to pass on changes in raw material prices to our customers on a timely basis;
●performance of our business and future operating results; 
●risks related to our acquisition strategyacquisitions or divestitures and integration of acquired businesses; businesses and their operations, and realization of anticipated cost savings and synergies;
●risk related to international business, including as a result of the RPC transaction, including foreign currency exchange rate risk and the risks of compliance with applicable export controls, sanctions, anti-corruption laws and regulations;
●uncertainty regarding the United Kingdom’s withdrawal from the European Union and the outcome of future arrangements between the United Kingdom and the European Union;
●reliance on unpatented proprietary know-how and trade secrets;
●the phase-out of the London Interbank Offered Rate (LIBOR), or the replacement of LIBOR with a different reference rate or modification of the method used to calculate LIBOR, which may adversely affect interest rates;
●increases in the cost of compliance with laws and regulations, including environmental, safety, andanti-plastic legislation, production and product laws and regulations;
●employee shutdowns or strikes or the failure to renew effective bargaining agreements;
●risks related to disruptions in the overall economy and the financial markets that may adversely impact our business; business, including as a result of the COVID-19 pandemic;
●risk of catastrophic loss of one of our key manufacturing facilities, natural disasters, and other unplanned business interruptions;
●risks of competition, including foreign competition, in our existing and future markets; 
●risks related to the failure of, inadequacy of, or cybersecurity attacks on our information technology systems and infrastructure;
●risks related to market acceptance of our developing technologies and products;
●general business and economic conditions, particularly an economic downturn;
●risks that our restructuring programprograms may entail greater implementation costs or result in lower cost savings than anticipated;

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●the ability of our insurance to cover fully ourcover potential exposures;
●risks related to future write-offs of our substantial goodwill;
●risks of competition, including foreign competition, in our existing and future markets;
●new legislation or new regulations and the Company's corresponding interpretations of either may affect our business and consolidated financial condition and results of operations; and
●the other factors discussed in our most recent Form 10-K and in this Form 10-Q in the section titled "Risk Factors."


We caution readers that the foregoing list of important factors may not contain all of the material factors that are important to you.  In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this Form 10-Q may not in fact occur. Accordingly, investors should not place undue reliance on those statements. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.


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

Issuer Repurchases of Equity Securities

During the quarter, the Company did not repurchase any shares. As of June 27, 2020, $393 million of authorized shares remained available to purchase under the program.

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Item 6.  Exhibits

Item 6.Exhibit No.ExhibitsDescription of Exhibit
31.1*
 
3.1
Amended and Restated Bylaws of Berry Global Group, Inc., effective November 30, 2017 (incorporated by reference to Exhibit 3.1 to the Company's Form 8-K filed on November 30, 2017).
4.1
Indenture, by and between Berry Global, Inc., Berry Global Group, Inc., the subsidiaries of Berry Global, Inc. party thereto, and U.S. Bank National Association, as Trustee, relating to the 4.500% second priority senior secured notes due 2026, dated January 26, 2018 (incorporated by reference to Exhibit 4.1 to the Company's Form 8-K filed on January 29, 2018).
10.1*
U.S. $900,000,000 and $814,375,000 Incremental Assumption Agreement, dated as of November 27, 2017, by and among Berry Global Group, Inc., Berry Global, Inc. and certain of its subsidiaries referenced therein, Credit Suisse AG, Cayman Islands Branch, as administrative agent for the lenders under the term loan credit agreement referenced therein, Citibank, N.A., as initial Term O lender and  Citibank, N.A., as initial Term P lender therein.
10.2*
Senior Executive Employment Contract dated as of September 30, 2015 between PGI Specialty Materials Inc. and Jean Marc Galvez, together with the International Assignment Letter dated December 18, 2016 from Berry Global, Inc.  (f/k/a Berry Plastics Corporation).
31.1* 
Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer.
31.2* 
31.2*
Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer.
32.1* 
32.1*
Section 1350 Certification of the Chief Executive Officer.
32.2* 
32.2*
Section 1350 Certification of the Chief Financial Officer.
101. 101.INSInline XBRL Instance Document (the instance document does not appear in the Interactive Data Files.File because its XBRL tags are embedded within the Inline XBRL document).
101.SCHInline XBRL Taxonomy Extension Schema Document.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.
101.LABInline XBRL Taxonomy Extension Label Linkbase Document.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.
104Cover Page Interactive Date File (formatted as Inline XBRL and contained in Exhibit 101).

* Filed herewith.

*          Filed herewith
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SIGNATURE

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

 Berry Global Group, Inc. 
    
February 7, 2018July 31, 2020By:/s/ Mark W. Miles 
  Mark W. Miles 
  Chief Financial Officer 


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