SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-K





(Mark One)


[X]Annual
      report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934 for the fiscal year ended


September 26,
      2009


or





[  ]Transition
      report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934  for the transition period from


to





Commission
File Number 033-75706-01


BERRY
PLASTICS CORPORATION


(Exact name of registrant as
specified in its charter)





Delaware
            35-1814673(State
      or other jurisdiction
              of
      incorporation or organization)
            (IRS
      employer
              identification
      number)101
      Oakley Street
              Evansville,
      Indiana
            47710(Address
      of principal executive offices)
            (Zip
      code)





SEE
TABLE OF ADDITIONAL REGISTRANT GUARANTORS





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





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





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





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.  Yes
[   ]  No [X]





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of
1934.  Yes [X]  No [   ]





Indicate
by check mark whether the registrant:  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) have been subject to such filing
requirements for the past 90 days.  Yes [X]  No
[   ]





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).   Yes
[   ]  No [X]





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K:  Not applicable.





Indicate
by check mark whether the registrant is a large accelerated filer, accelerated
filer, or non-accelerated filer.  See definition of “accelerated filer
and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
one):


Large
accelerated filer
[     ]                        Accelerated
filer  [     ]                                   Non-accelerated
filer [  X  ]





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





As of
November 5, 2009, all of the outstanding 100 shares of the Common Stock, $.01
par value, of Berry Plastics Corporation were held by Berry Plastics Group,
Inc.





DOCUMENTS INCORPORATED BY
REFERENCE


None




-1-


Table
of Additional Registrant Guarantors




Exact
      Name
            Jurisdiction
      of Organization
            Primary
      Standard Industrial Classification Code Number
            I.R.S.  Employer
      Identification No.
            Name,
      Address and Telephone Number of Principal Executive
  OfficesAerocon,
      LLC
            Delaware
            3089
            35-1948748
            (a)Berry
      Iowa, LLC
            Delaware
            3089
            42-1382173
            (a)Berry
      Plastics Design, LLC
            Delaware
            3089
            62-1689708
            (a)Berry
      Plastics Technical Services, Inc.
            Delaware
            3089
            57-1029638
            (a)Berry
      Sterling Corporation
            Delaware
            3089
            54-1749681
            (a)CPI
      Holding Corporation
            Delaware
            3089
            34-1820303
            (a)Knight
      Plastics, Inc.
            Delaware
            3089
            35-2056610
            (a)Packerware
      Corporation
            Delaware
            3089
            48-0759852
            (a)Pescor,
      Inc.
            Delaware
            3089
            74-3002028
            (a)Poly-Seal,
      LLC
            Delaware
            3089
            52-0892112
            (a)Venture
      Packaging, Inc.
            Delaware
            3089
            51-0368479
            (a)Venture
      Packaging Midwest, Inc.
            Delaware
            3089
            34-1809003
            (a)Berry
      Plastics Acquisition Corporation III
            Delaware
            3089
            37-1445502
            (a)Berry
      Plastics Opco, Inc.
            Delaware
            3089
            30-0120989
            (a)Berry
      Plastics Acquisition Corporation V
            Delaware
            3089
            36-4509933
            (a)Berry
      Plastics Acquisition Corporation VIII
            Delaware
            3089
            32-0036809
            (a)Berry
      Plastics Acquisition Corporation IX
            Delaware
            3089
            35-2184302
            (a)Berry
      Plastics Acquisition Corporation X
            Delaware
            3089
            35-2184301
            (a)Berry
      Plastics Acquisition Corporation XI
            Delaware
            3089
            35-2184300
            (a)Berry
      Plastics Acquisition Corporation XII
            Delaware
            3089
            35-2184299
            (a)Berry
      Plastics Acquisition Corporation XIII
            Delaware
            3089
            35-2184298
            (a)Berry
      Plastics Acquisition Corporation XV, LLC
            Delaware
            3089
            35-2184293
            (a)Kerr
      Group, LLC
            Delaware
            3089
            95-0898810
            (a)Saffron
      Acquisition, LLC
            Delaware
            3089
            94-3293114
            (a)Setco,
      LLC
            Delaware
            3089
            56-2374074
            (a)Sun
      Coast Industries, LLC
            Delaware
            3089
            59-1952968
            (a)Tubed
      Products, LLC
            Delaware
            3089
            56-2374082
            (a)Cardinal
      Packaging, Inc.
            Ohio
            3089
            34-1396561
            (a)Landis
      Plastics, LLC
            Delaware
            3089
            36-2471333
            (a)Covalence
      Specialty Adhesives LLC
            Delaware
            2672
            20-4104683
            (a)Covalence
      Specialty Coatings LLC
            Delaware
            2672
            20-4104683
            (a)Caplas
      LLC
            Delaware
            3089
            20-3888603
            (a)Caplas
      Neptune, LLC
            Delaware
            3089
            20-5557864
            (a)Captive
      Holdings, Inc.
            Delaware
            3089
            20-1290475
            (a)Captive
      Plastics, Inc.
            New
      Jersey
            3089
            22-1890735
            (a)Grafco
      Industries Limited Partnership
            Maryland
            3089
            52-1729327
            (a)Rollpak
      Acquisition Corporation
            Indiana
            3089
            03-0512845
            (a)Rollpak
      Corporation
            Indiana
            3089
            35-1582626
            (a)


(a)  101
Oakley Street, Evansville, IN 47710





-2-


CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS





This Form
10-K for the fiscal period ending September 26, 2009 (“fiscal 2009”) and
comparable periods September 27, 2008 (“fiscal 2008”) and September 29, 2007
(“fiscal 2007”) includes "forward-looking statements," within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), with respect to our financial
condition, results of operations and business and our expectations or beliefs
concerning future events.  Such statements include, in particular,
statements about our plans, strategies and prospects under the headings
"Management’s Discussion and Analysis of Financial Condition and Results of
Operations" and "Business."  You can identify certain forward-looking
statements by our use of forward-looking terminology such as, but not limited
to, "believes," "expects," "anticipates," "estimates," "intends," "plans,"
"targets," "likely," "will," "would," "could" and similar expressions that
identify forward-looking statements.  All forward-looking statements
involve risks and uncertainties.  Many risks and uncertainties are
inherent in our industry and markets. Others are more specific to our
operations.  The occurrence of the events described and the
achievement of the expected results depend on many events, some or all of which
are not predictable or within our control. Actual results may differ materially
from the forward-looking statements contained in this Form
10-K.  Factors that could cause actual results to differ materially
from those expressed or implied by the forward-looking statements
include:





·
            risks
      associated with our substantial indebtedness and debt
    service


·
            changes
      in prices and availability of resin and other raw materials and our
      ability to pass on changes in raw material prices on a timely
      basis;


·
            performance
      of our business and future operating
results;


·
            risks
      related to our acquisition strategy and integration of acquired
      businesses;


·
            reliance
      on unpatented know-how and trade
secrets;


·
            increases
      in the cost of compliance with laws and regulations, including
      environmental laws and regulations;


·
            risks
      related to disruptions in the overall economy and the financial markets
      may adversely impact our business;


·
            catastrophic
      loss of one of our key manufacturing
facilities;


·
            risks
      of competition, including foreign competition, in our existing and future
      markets;


·
            general
      business and economic conditions, particularly an economic downturn;
      and


·
            the
      other factors discussed in the section of this Form 10-K titled “Risk
      Factors.”





We
caution you 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-K may not in fact occur. 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.







-3-


TABLE OF CONTENTS





FORM
10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 26, 2009








PART
      I
            Page No.Item
      1.      BUSINESS
            5Item
      1A.   RISK FACTORS
            14Item
      1B.    UNRESOLVED STAFF
      COMMENTS
            18Item
      2.      PROPERTIES
            18Item
      3.      LEGAL
      PROCEEDINGS
            19Item
      4.      SUBMISSION OF
      MATTERS TO A VOTE OF SECURITY HOLDERS
            19PART
      IIItem
      5.      MARKET FOR
      REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER
      PURCHASES OF EQUITY SECURITIES
            19Item
      6.      SELECTED FINANCIAL
      DATA
            20Item
      7.      MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
            21Item
      7A.   QUANTITATIVE AND QUALITATIVE
      DISCLOSURES ABOUT MARKET RISK
            35Item
      8.      FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA
            36Item
      9.      CHANGES IN AND
      DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE
            37Item
      9A.   CONTROLS AND
      PROCEDURES
            37Item
      9B.    OTHER
      INFORMATION
            38PART
      IIIItem
      10.    DIRECTORS AND EXECUTIVE
      OFFICERS OF THE REGISTRANT
            39Item
      11.    EXECUTIVE
      COMPENSATION
            41Item
      12.    SECURITY OWNERSHIP OF CERTAIN
      BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
      MATTERS
            47Item
      13.    CERTAIN RELATIONSHIPS AND
      RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
            49Item
      14.    PRINCIPAL ACCOUNTING FEES AND
      SERVICES
            50PART
      IVItem
      15.    EXHIBITS AND FINANCIAL
      STATEMENT SCHEDULES
            51


-4-





Item
1.  BUSINESS





General





We
believe we are one of the world’s leading manufacturer and marketers of plastic
packaging products, plastic film products, specialty adhesives and coated
products.  We manufacture a broad range of innovative, high quality
packaging solutions using our collection of over 2,200 proprietary molds and an
extensive set of internally developed processes and technologies. Our principal
products include containers, drink cups, bottles, closures and overcaps, tubes
and prescription containers, trash bags, stretch films, plastic sheeting, and
tapes which we sell into a diverse selection of attractive and stable end
markets, including food and beverage, healthcare, personal care, quick service
and family dining restaurants, custom and retail, agricultural, horticultural,
institutional, industrial, construction, aerospace, and
automotive.  We sell our packaging solutions to approximately 13,000
customers, ranging from large multinational corporations to small local
businesses comprised of a favorable balance of leading national blue-chip
customers as well as a collection of smaller local specialty
businesses.  We believe that we are one of the largest global
purchasers of polyethylene resin, processing approximately one billion pounds
annually.  We believe that our proprietary tools and technologies,
low-cost manufacturing capabilities and significant operating and purchasing
scale provide us with a competitive advantage in the marketplace. Our unique
combination of leading market positions, proven management team, product and
customer diversity and manufacturing and design innovation provides access to a
variety of growth opportunities. Our top 10 customers represented approximately
21% of our fiscal 2009 net sales with no customer accounting for more than 6% of
our fiscal 2009 net sales.  The average length of our relationship
with these customers was over 20 years. Additionally, we operate more than 60
strategically located manufacturing facilities and have extensive distribution
capabilities.





Current
Year Acquisitions and Divestitures





Erie
County Plastics Corporation





In
November 2008, the Company was the successful bidder to acquire certain assets
of Erie County Plastics Corporation, a custom injection molder of plastics
packaging and components for $4.6 million.  Erie Plastics previously
filed for bankruptcy protection on September 29, 2008.  The Company
funded the acquisition of these assets with cash from
operations.  Synergies identified from the Erie acquisition were $4.0
million.





Sale
of Capsol Berry Plastics S.p.a.





In March
2009, we sold Capsol Berry Plastics S.p.a.  This business generated
annual net sales of approximately $17.0 million and was included in our Rigid
Closed Top segment.  The sale resulted in a net loss of $4.2 million,
net of tax, which is included in Discontinued operations.





Recent
Developments





In
October 2009, we announced our intention to acquire the equity of Pliant
Corporation (“Pliant”) upon its emergence from reorganization pursuant to a
proceeding under Chapter 11 of the Bankruptcy Code. If the acquisition is
completed, Pliant would be a wholly owned subsidiary of Berry
Plastics.  Pliant is a leading manufacturer of value-added films and
flexible packaging for food, personal care, medical, agricultural and industrial
applications with annual net sales of $1,127.6 million in calendar 2008. Pliant
manufactures key components in a wide variety of flexible packaging products for
use in end-use markets such as coffee, confections, snacks, fresh produce,
lidding, and hot-fill liquids as well as providing printed rollstock, bags and
sheets used to package consumer goods. Pliant also offers a diverse product line
of film industry-related products and has achieved leading positions in many of
these product lines.





In
November 2009, in order to fund the $561.0 million Pliant acquisition estimated
purchase price, two of our unrestricted subsidiaries completed a private
placement of $370.0 million aggregate principal amount of 8 1⁄4% First Priority
Senior Secured Notes due on November 15, 2015 and $250.0 million aggregate
principal amount of 87⁄8%Second
Priority Senior Secured Notes due on September 15, 2014.  In light of
the conditions required to effect the proposed Pliant acquisition including
customary antitrust approvals, the gross proceeds of $596.3 million, before fees
and expenses, from this offering were placed into segregated escrow collateral
accounts pending our right to acquire the equity


-5-
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to Table of Contents


of Pliant
upon emergence from bankruptcy.  Therefore, if the Pliant acquisition
does not occur prior to January 29, 2010, or such earlier date as we determine
at our sole discretion that any of the offering escrow conditions cannot be
satisfied, then these Notes will be subject to a special mandatory redemption at
a price equal to 100% of the gross proceeds of such Notes, plus accrued and
unpaid interest to, but not including, the date of redemption.  As
part of acquisition of Pliant, the offering we expect to increase the amount of
our lender commitments under our revolving credit facility by $100
million.





In
November 2009, we entered into a definitive agreement to acquire 100% of the
outstanding common stock of Superfos Packaging, Inc., a manufacturer of
injection molded plastic rigid open top containers and other plastic packaging
products for the food, industrial and household chemical, building materials and
personal care end markets which had 2008 annual net sales of $46.8
million.  The purchase price is approximately $82 million and will be
funded from cash on hand or existing credit facilities.





Product
Overview





We
organize our business into four operating divisions: Rigid Open Top, Rigid
Closed Top, Flexible Films, and Tapes and Coatings.  Additional
financial information about our business segments is provided in “Management's
Discussion and Analysis of Financial Condition and Results of Operations” and
the “Notes to Consolidated Financial Statements,” which are included elsewhere
in this Form 10-K.





Rigid
Open Top





Our Rigid
Open Top division is comprised of three product categories: containers,
foodservice items (drink cups, institutional catering, and cutlery) and home and
party.  The largest end-uses for our containers are food and beverage
products, building products and chemicals.  We believe that we offer
one of the broadest product lines among U.S.-based injection-molded plastic
container and drink cup manufacturers and are a leader in thermoformed container
and drink cup offerings, which provide a superior combination of value and
quality relative to competing processes.  Many of our open top
products are manufactured from proprietary molds that we develop and own, which
results in significant switching costs to our customers.  In
addition to a complete product line, we have sophisticated printing capabilities
and in-house graphic arts and tooling departments, which allow us to integrate
ourselves into, and add material value to, our customers’ packaging design
process.  Our product engineers work directly with customers to design
and commercialize new products.  In order to identify new markets and
applications for existing products and opportunities to create new products, we
rely extensively on our national sales force.  Once these
opportunities are identified, our sales force works with our product design
engineers and artists to satisfy customers’ needs.  Our low-cost
manufacturing capability with plants strategically located throughout the United
States and a dedication to high-quality products and customer service have
allowed us to further develop and maintain strong relationships with our
attractive base of customers.  Our primary competitors include
Airlite, Huhtamaki, Letica, Polytainers, Pactiv and Solo.  These
competitors individually only compete on certain of our open top products,
whereas we offer the entire selection of open top products described
below.







Containers.We manufacture a collection
of nationally branded container products and also seek to develop customized
container products for niche applications by leveraging of our state-of-the-art
design, decoration and graphic arts capabilities.  This mix allows us
to both achieve significant economies of scale, while also maintaining an
attractive portfolio of specialty products.  Our container capacities
range from 4 ounces to 5 gallons and are offered in various styles with
accompanying lids, bails and handles, some of which we produce, as well as a
wide array of decorating options.  We have long-standing supply
relationships with many of the nation’s leading food and consumer products
companies, including Dannon, Dean Foods, General Mills, Kraft, Kroger and
Unilever.
  Foodservice.We believe that
we are the largest provider of large size thermoformed polypropylene (“PP”)
and injection-molded plastic drink cups in the United States.  We
are the leading producer of 32 ounce or larger thermoformed PP drink cups
and offer a product line with sizes ranging from 12 to 52
ounces.  Our thermoform process uses PP instead of more expensive
polystyrene or polyethylene terephthalate (“PET”) in producing deep draw drink
cups to generate a cup of superior quality with a material competitive cost
advantage versus thermoformed polystyrene or PET drink
cups.  Additionally, we produce injection-molded plastic cups that
range in size from 12 to 64 ounces.  Primary markets for our plastic
drink cups are quick service and family dining restaurants, convenience stores,
stadiums and retail stores.  Many of our cups are decorated, often as
promotional items, and we believe we


-6-
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have a
reputation in the industry for innovative, state-of-the-art
graphics.  Selected drink cup customers and end users include
Hardee’s, McDonald’s, Quik Trip, Starbucks, Subway, Wendy’s and Yum!
Brands.


Home and
Party.  Our participation
in the home and party market is focused on producing semi-disposable plastic
home and party and plastic garden products.  Examples of our products
include plates, bowls, pitchers, tumblers and outdoor flowerpots.  We
sell virtually all of our products in this market through major national retail
marketers and national chain stores, such as Wal-Mart.  PackerWare is
our recognized brand name in these markets and PackerWare branded products are
often co-branded by our customers.  Our strategy in this market has
been to provide high value to consumers at a relatively modest price, consistent
with the key price points of the retail marketers.  We believe
outstanding service and the ability to deliver products with timely combination
of color and design further enhance our position in this
market.


Rigid
Closed Top





Our Rigid
Closed Top division is comprised of three product categories; closures and
overcaps, bottles and prescription containers, and tubes.  We believe
that this line of products gives us a competitive advantage in being able to
provide a complete plastic package to our customers.  We have a number
of leading positions in which we have been able to leverage this capability such
as prescription container packages, Tab II® pharmaceutical packages, and
proprietary tube and closure designs.  Our innovative design center
and product development engineers regularly work with our customers to develop
differentiated packages that offer unique shelf presence, functionality, and
cost competitiveness.  Combine our design expertise with our world
class manufacturing facilities, and we are uniquely positioned to take projects
from creative concept to delivered end product.  We utilize a broad
range of manufacturing technologies, offering several different manufacturing
processes, including various forms of injection, extrusion, compression, and
blow molding, as well as decorating and lining services.  This allows
us to match the optimal manufacturing platform with each customer’s desired
package design and volume.  Our quality system, which includes an
emphasis on process control and vision technology, allows us to meet the
increasingly high performance and cosmetic standards of our
customers.  Our primary competitors include Graham Packaging, Rexam,
Rank/Alcoa, Ball and Silgan.  With few exceptions, these competitors
do not compete with us across many of our products and market
segments.  We believe that we are the only industry participant that
offers the entire product line of our Rigid Closed Top products described
below.  We have a strong reputation for quality and service, and have
received numerous “Supplier Quality Achievement Awards” from customers, as well
as “Distribution Industry Awards” from market associations.





Closures and
Overcaps.  We are a leading producer of closures and overcaps
across several of our product lines, including continuous thread and child
resistant closures, as well as aerosol overcaps.  Our dispensing
closure business has been growing rapidly, as more consumer products migrate
towards functional closures.  We currently sell our closures into
numerous end markets, including pharmaceutical, vitamin/nutritional, healthcare,
food/beverage and personal care.  In addition to traditional closures,
we are a provider of a wide selection of custom closure solutions including
fitments and plugs for medical applications, cups and spouts for liquid laundry
detergent, and dropper bulb assemblies for medical and personal care
applications.  Further, we believe that we are the leading domestic
producer of injection-molded aerosol overcaps.  Our aerosol overcaps
are used in a wide variety of consumer goods including spray paints, household
and personal care products, insecticides and numerous other commercial and
consumer products.  We believe our technical expertise and
manufacturing capabilities provide us a low cost position that has allowed us to
become a leading provider of high quality closures and overcaps to a diverse set
of leading companies.  Our manufacturing advantage is driven by our
position on the forefront of various technologies, including the latest in
single and bi-injection processes, compression molding of thermoplastic and
thermoset resins, precise reproduction of colors, automation and vision
technology, and proprietary packing technology that minimizes freight cost and
warehouse space.  The majority of our overcaps and closures are
manufactured from proprietary molds, which we design, develop, and
own.  In addition to these molds, we utilize state of the art lining,
assembly, and decorating equipment to enhance the value and performance of our
products in the market.  Our closure and aerosol overcap customers
include McCormick, Bayer, Diageo, Pepsico, Wyeth, Kraft, Sherwin-Williams and
S.C. Johnson.





Bottles and
Prescription Containers.  Our bottle and prescription container
businesses target similar markets as our closure business.  We believe
we are the leading supplier of spice containers in the United States and have a
leadership position in various food and beverage, vitamin and nutritional
markets, as well as selling bottles into prescription and pharmaceutical
applications.  Additionally, we are a leading supplier in the
prescription container


-7-
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market,
supplying a complete line of amber containers with both one-piece and two-piece
child-resistant closures.  We offer an extensive line of stock
polyethylene (“PE”) and PET bottles for the vitamin and nutritional
markets.  Our design capabilities, along with internal engineering
strength give us the ability to compete on customized designs to provide desired
differentiation from traditional packages.  We also offer our
customers decorated bottles with hot stamping, silk screening and
labeling.  We sell these products to personal care, pharmaceutical,
food and consumer product customers, including McCormick, Pepsico, Carriage
House, Perrigo, CVS, NBTY, Target Stores, John Paul Mitchell and
Novartis.





Tubes.  We
believe that we are one of the largest suppliers of extruded plastic squeeze
tubes in the United States.  We offer a complete line of tubes from 1⁄2”
to 2 1⁄4” in diameter.  We have also introduced laminate tubes to
complement our extruded tube business.  Our focus and investments are
made to ensure that we are able to meet the increasing trend towards large
diameter tubes with high-end decoration.  We have several proprietary
designs in this market that combine tube and closure, that have won prestigious
package awards, and are viewed as very innovative both in appearance,
functionality, and from a sustainability standpoint.  The majority of
our tubes are sold in the personal care market, focusing on products like
facial/cold creams, shampoos, conditioners, bath/shower gels, lotions, sun care,
hair gels and anti-aging creams.  We also sell our tubes into the
pharmaceutical and household chemical markets.  We believe that our
ability to provide creative package designs, combined with a complementary line
of closures, makes us a preferred supplier for many customers in our target
markets including Kao Brands, L’Oreal, Avon, and Procter &
Gamble.





Flexible
Films





Our
Flexible Films division manufactures and sells primarily PE-based film products.
Our principal products include trash bags, drop cloths, agricultural film,
stretch film, shrink film and custom packaging film. We are one of the largest
producers of plastic trash bags, stretch film and plastic sheeting in the United
States. Our Ruffies trash bags are a leading value brand of retail trash bags in
the United States. Our products are used principally in the agricultural,
horticultural, institutional, foodservice and retail markets.  Our
primary competitors include PolyAmerica, Heritage, AEP, Sigma and Pactiv. The
Flexible Film division includes the following product groups:





Do-It-Yourself.  We
sell branded and private label plastic sheeting for construction, consumer, and
agricultural end users.  These products are sold under leading brands
such as Film-Gard® and Tufflite®.  Our products also include drop
cloths, painters’ plastics, greenhouse films, irrigation tubing, Ruffies®,
Ruffies Pro® and private label trash bags.  Our do-it-yourself
products are sold primarily through wholesale outlets, hardware stores and home
centers, paint stores and mass merchandisers, as well as agricultural
distributors.  Our Do-It-Yourself customers include Home Depot, Lowes,
True Value and ACE.





Institutional.  We
sell trash-can liners and food bags for “away from home” locations such as
offices, restaurants, schools, hospitals, hotels, municipalities and
manufacturing facilities.  We also sell products under the Big City®,
Hospi-Tuff®, Plas-Tuff®, Rhino-X® and Steel-Flex® brands.  Our
institutional customers include Unisource and Gorden Food Service.





Custom Films.  We
manufacture a diverse group of niche custom films, including shrink-bundling
film, used to wrap and consolidate sets of products, and barrier films for food,
beverage and industrial packaging.  These products are sold directly
to converters and end users, as well as through distributors.  Our
custom films customers include Nestle and Group O.





Stretch Films.  We
produce both hand and machine-wrap stretch films, which are used by end users to
wrap products and packages for storage and shipping.  We sell stretch
film products to distributors and retail and industrial end users under the
MaxTech® and PalleTech® brands.  Our stretch films customers include
XPEDX and Unisource.





Retail.  We
primarily sell branded and private label retail trash bags.  Our
Ruffies® brand of trash bags is a leading value brand in the United
States.  Private label products are manufactured to the specifications
of retailers and carry their customers’ brands.  Retail products are
sold to mass merchandisers, grocery stores, and drug stores.  Our
retail customers include Walmart, Big Lots and HEB.


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Tapes
and Coatings





Our Tapes
and Coatings division manufactures and sells tape, adhesive and corrosion
protective products to a diverse base of customers around the
world.  We offer a broad product portfolio of key product groups to a
wide range of global end markets that include corrosion protection, HVAC,
building and construction, industrial, retail, automotive medical and
aerospace.  Our principal products include heat shrinkable and
PE-based tape coatings, PE coated cloth tapes, splicing/laminating tapes,
flame-retardant tapes, vinyl-coated tapes, and a variety of other specialty
tapes, including carton sealing, masking, mounting and OEM medical
tapes.  We specialize in manufacturing laminated and coated products
for a diverse range of applications, including flexible packaging, products for
the housing construction and woven polypropylene flexible intermediate bulk
containers (“FIBC”).  We use a wide range of substrates and basic
weights of paper, film, foil and woven and non-woven fabrics to service the
residential building, industrial, food packaging, healthcare and military
markets.  Our primary
competitors include Intertape Polymers, 3-M, ShurTape, Canusa, Denso, Caddalic,
Coated Excellence and FortaFiber.




Tapes.  We produce
and sell a diverse portfolio of specialty adhesive products and provide products
to end users in the industrial, oil, gas and water supply, HVAC, building and
construction, retail, automotive, and medical markets.  We sell our
products to a wide-range of customers, including retailers, distributors and end
users.  We manufacture our products primarily under eight brands,
including Nashua® and Polyken® and include the following product
groups:




Tape Products—We are the
leading North American manufacturer of cloth and foil tape
products.  Other tape products include high-quality, high performance
liners of splicing and laminating tapes, flame-retardant tapes, vinyl-coated and
carton sealing tapes, electrical, double-faced cloth, masking, mounting, OEM
medical and other specialty tapes.  These products are sold under the
NationalTM, Nashua®, and Polyken® brands in the United States.  Tape
products are sold primarily through distributors and directly to end users and
are used predominantly in industrial, HVAC, automotive, construction and retail
market applications.  In addition to serving our core tape end
markets, we are also a leading producer of tapes in the niche aerospace,
construction and medical end markets.  We believe that our success in
serving these additional markets is principally due to a combination of
technical and manufacturing expertise leveraged in favor of customized
applications.  Our tape products customers include Home Depot, Gorilla
Glue and RH Elliott.




Corrosion Protection
Products—- We are the leading global producer of adhesive products to
infrastructure, rehabilitation and new pipeline projects throughout the
world.  Our products deliver superior performance across all climates
and terrains for the purpose of sealing, coupling, rehabilitation and corrosion
protection of pipelines.  Products include heat-shrinkable coatings,
single- and multi-layer sleeves, pipeline coating tapes, anode systems for
cathodic protection and epoxy coatings.  These products are used in
oil, gas and water supply and construction applications.  Our
customers primarily include contractors managing discrete construction projects
around the world as well as distributors and applicators.  Our
corrosion protection products customers include Tyco Electronics, Northwest Pipe
and Midwestern Pipeline Products.




Specialty Adhesives—Our
specialty adhesives manufacturing and design capabilities support many
applications in virtually every industry.  We produce single and
double coated transfer tapes for bonding applications for the medical,
aerospace, specialty industrial and automotive assembly end
markets.  Our products are primarily sold under its PatcoTM and STGTM
brand names and the vast majority of them are sold directly to end-use customers
with whom we work to develop products for application-specific
uses.  Our specialty adhesives customers include Covidien, Cardinal
Healthcare and Rogers Corp.





Coatings. We manufacture and
sell a diversified portfolio of coated and laminated products, including
flexible packaging, multi-wall bags, fiber-drum packaging, housewrap, and
PP-based storage containers.  These products are sold for use in
packaging, construction, and material handling applications.  We sell
our coated products under a number of brands, including Barricade® and
R-Wrap®.  In addition, a number of our construction-related products
are also sold under private labels.  Our customers include converters,
distributors, contractors and manufacturers.  We provide products to a
diverse group of end users in the food, consumer, building and construction,
medical, chemical, agriculture, mining and military markets under the following
product lines:





Flexible Packaging – We
manufacture specialty coated and laminated products for a wide variety of
packaging applications.  The key end-markets and applications for our
products include food, consumer, healthcare,


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industrial
and military pouches, roll wrap, multi-wall bags and fiber drum
packaging.  Our products are sold under the MarvelGuardTM and
MarvelSealTM brands and are predominately sold to converters who transform them
into finished goods.  Our flexible packaging customers include
Covidien, Edco Supply and Morton Salt.





Building Products – We
produce exterior linerboard and foil laminated sheathing, housewrap and exterior
window and door flashings for the building and construction
end-markets.  Our products are sold under a number of market leading
brands, including Barricade®, ContourTM, Energy-Wrap®, Opti-Flash®, R-Wrap®,
Thermo-Ply®, and WeatherTrek®. These products are sold to wholesale
distributors, lumberyards and directly to building contractors.  Our
building products customers include Blue Linx Corp. and Hutting Building
Products.





FIBC –We manufacture
customized polypropylene-based, woven and sewn containers for the transportation
and storage of raw materials such as seeds, titanium dioxide, clay and resin
pellets.  Our FIBC customers include Texene LLC, Pioneer Hi-Bred Intl.
and Superior Ingenio.





Marketing
and Sales





We reach
our large and diversified base of approximately 13,000 customers through our
direct field sales force of dedicated professionals and the strategic use of
distributors.  Our field sales, production and support staff meet with
customers to understand their needs and improve our product offerings and
services.  Our scale enables us to dedicate certain sales and
marketing efforts to particular products, customers or geographic regions, when
applicable, which enables us to develop expertise that is valued by our
customers.  In addition, because we serve common customers across
segments, we have the ability to efficiently utilize our sales and marketing
resources to minimize costs.  Highly skilled customer service
representatives are strategically located throughout our facilities to support
the national field sales force.  In addition, telemarketing
representatives, marketing managers and sales/marketing executives oversee the
marketing and sales efforts.  Manufacturing and engineering personnel
work closely with field sales personnel and customer service representatives to
satisfy customers’ needs through the production of high-quality, value-added
products and on-time deliveries.





Our sales
force is also supported by technical specialists and our in-house graphics and
design personnel.  Our creative services department includes
computer-assisted graphic design capabilities and in-house production of
photopolymer printing plates.  We also have a centralized color
matching and materials blending department that utilizes a computerized
spectrophotometer to insure that colors match those requested by
customers.





We
believe that we have differentiated ourselves from competitors by building a
reputation for high-quality products, customer service, and
innovation.  Our sales team monitors customer service in an effort to
ensure that we remain the primary supplier for our key accounts.  This
strategy requires us to develop and maintain strong relationships with our
customers, including end users as well as distributors and
converters.  We have a technical sales team with significant knowledge
of our products and processes, particularly in specialized
products.  This knowledge enables our sales and marketing team to work
closely with our research and development organization and our customers to
co-develop products and formulations to meet specific performance
requirements.  This partnership approach enables us to further expand
our relationships with our existing customer base, develop relationships with
new customers and increase sales of new products.





Manufacturing





We
manufacture our Rigid Open Top and Rigid Closed Top products utilizing several
primary molding methods including: injection, thermoforming, compression, tube
extrusion and blow molding.  These processes begin with raw plastic
pellets, which are then converted into finished products.  In the
injection process, the raw pellets are melted to a liquid state and injected
into a multi-cavity steel mold where the resin is allowed to solidify to take
the final shape of the part.  In the thermoform process, the raw resin
is softened to the point where sheets of material are drawn into multi-cavity
molds and formed over the molds to form the desired
shape.  Compression molding is a high-speed process that begins with a
continuously extruded plastic melt stream that is cut while remaining at molding
temperature and carried to the mold cavity.  Independent mold cavities
close around the molten plastic, compressing it to form the part, which is
cooled and ejected. In the tube extrusion process, we extrude resin that is
solidified in the shape of a tube and then cut to length.  The tube
then has the head added by using another extruder that extrudes molten resin
into a steel die where the


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cut tube
is inserted into the steel die.  In blow molding we use three blow
molding systems: injection, extrusion, and stretch blow.  Injection
blow molding involves injecting molten resin into a multiple cavity steel die
and allowing it to solidify into a preform.  The parts are then
indexed to a blow station where high-pressure air is used to form the preform
into the bottle.  In extrusion blow molding, we extrude molten plastic
into a long tube and then aluminum dies clamp around the tube and high-pressure
air is used to form the bottle.  In stretch blow molding, we inject
molten plastic into a multi-cavity steel mold where the parts are allowed to
cool in the mold until they are solidified.  The parts are then
brought to a stretch blow molding machine where they are reheated and then
placed in aluminum dies where high pressure air is used to form the
bottle.  The final cured parts are transferred from the primary
molding process to corrugated containers for shipment to customers or for
post-molding secondary operations (offset printing, labeling, lining,
silkscreening, handle applications, etc.).





We
manufacture our film products by combining thermoplastic resin pellets with
other resins, plasticizers or modifiers, then melting them in a controlled, high
temperature, pressurized process known as extrusion to create films with
specific performance characteristics. The films are then placed on a circular
core, packaged, and shipped directly to customers as rollstock or may undergo
further processing. Additional processing steps can include printing various
colors, slitting down to a narrower width roll or converting into finished
bags.





We
manufacture our Tapes and Coated products utilizing a wide variety of processing
equipment including coating lines, calenders, and extruders.  Base raw
materials include both PE and PP resins, as well as specialty resins, cloth,
natural rubber, sythenthetic rubber, tackifiers and colorants that are converted
into finished goods via the use of winding and slitting equipment.




We
continuously test raw material and finished-good shipments to ensure that both
our inputs and outputs meet our quality specifications.  Additionally,
we perform regular audits of our products and processes throughout
fabrication.  Given the highly competitive industry in which we
compete, product quality and competitive pricing are important to maintaining
our market positions.  Our national manufacturing capabilities and
broad distribution network allow us to provide a high level of service to our
customers in nearly every major population center in North America. Our customer
base includes many national retailers, manufacturers, and distributors which
rely on us to distribute to locations throughout North America.  Our
broad distribution network enables us to work in conjunction with our customers
to minimize their lead times, reduce freight cost, and minimize inventory
levels.  Each plant has maintenance capabilities to support
manufacturing operations.  We have historically made, and intend to
continue to make, significant capital investments in plant and equipment because
of our objectives to improve productivity, maintain competitive advantages and
foster continued growth.  Capital expenditures for fiscal 2009 were
$194.4 million which includes a significant amount of expenditures for capacity
additions and other growth opportunities across our business as well as
expenditures related to cost-saving opportunities and our estimated annual level
of maintenance capital expenditures of approximately $34.8 million.





Research,
Product Development and Design





We
believe our technology base and research and development support are among the
best in the plastics packaging industry.  Using three-dimensional
computer aided design technologies, our full time product designers develop
innovative product designs and models for the packaging market.  We
can simulate the molding environment by running unit-cavity prototype molds in
small injection-molding, thermoform, compression and blow molding machines for
research and development of new products.  Production molds are then
designed and outsourced for production by various companies with which we have
extensive experience and established relationships or built by our in-house
tooling division located in Evansville.  Our engineers oversee the
mold-building process from start to finish.  We currently have a
collection of over 2,200 proprietary molds.  Many of our customers
work in partnership with our technical representatives to develop new, more
competitive products.  We have enhanced our relationships with these
customers by providing the technical service needed to develop products combined
with our internal graphic arts support.  We also utilize our in-house
graphic design department to develop color and styles for new rigid
products.  Our design professionals work directly with our customers
to develop new styles and use computer-generated graphics to enable our
customers to visualize the finished product.





Additionally,
at our major technical centers in Lancaster, Pennsylvania, Lexington,
Massachusetts, and Homer, Louisiana, and satellite technical hubs in Lakeville,
Minnesota, Evansville, Indiana and Covington, Georgia, we prototype new ideas,
conduct research and development of new products and processes, and qualify
production systems


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that go
directly to our facilities and into production.  We also have a
complete product testing and quality laboratory at our Lancaster, Pennsylvania,
technical center and in our pilot plants in our technical centers in Lexington,
Massachusetts and Homer, Louisiana, we are able to experiment with new
compositions and processes with a focus on minimizing waste and improving
productivity.  With this combination of manufacturing simulation and
quality systems support we are able to improve time to market and reduce
cost.  We spent $15.7 million, $13.9 million, and $11.2 million on
research and development in fiscal 2009, 2008 and 2007,
respectively.





Quality
Assurance





We
believe in a Total Quality Management philosophy, including the use of
statistical process control and extensive involvement of employee teams that
increase productivity and reduce internal cost.  The guidelines of
International Organization for Standardization (“ISO”) 9001/2008 are the
disciplines to build a solid foundation in systems, employee involvement and
team work.  All employees are encouraged to belong to a team that
focuses on problem-solving, continuous improvement or cost
reduction.  Training is provided in Lean/Six Sigma, the application of
ISO 9001/2008 and understanding business needs.





Teams
utilize the Six Sigma methodology to improve internal processes and provide a
systematic approach to problem solving resulting in improved customer
service.  The drive for team work and continuous improvement is an
ongoing quality focus.  All of our facilities are ISO9001/2008
certified or have ISO Certification as a key goal to be
accomplished.





Certification
requires a demonstrated compliance by a company with a set of shipping, trading
and technology standards promulgated by ISO.  ISO 9001/2008 is the
discipline that encourages continuous improvement throughout the
organization.  Extensive testing of parts for size, color, strength
and material quality using statistical process control techniques and
sophisticated technology is also an ongoing part of our quality assurance
activities.





We drove
the team concept to develop a "working together business relationship,"
internally as well as externally with customers and suppliers.  All
employees are challenged to know their business, understand business goals and
held to high level of performance to meet Company goals.





Systems





We deploy
a shared information service model throughout the Company.  We believe
this service model along with our standardized set of applications gives us a
clear competitive advantage. This single, company wide, management information
and accounting system further enhances our internal control over financial
reporting and our operating efficiencies.





Sources
and Availability of Raw Materials





The most
important raw material purchased by us is plastic resin.  Our plastic
resin purchasing strategy is to deal with only high-quality, dependable
suppliers, such as Chevron, DAK Americas, Dow, Dupont, Eastman Chemical, Exxon
Mobil, Flint Hills Resources, Georgia Gulf, Lyondell/Bassell, Nova, PolyOne
Corp., Sunoco, Total, and Westlake.  We believe that we have
maintained strong relationships with these key suppliers and expect that such
relationships will continue into the foreseeable future.  The resin
market is a global market and, based on our experience, we believe that adequate
quantities of plastic resins will be available at market prices, but we can give
you no assurances as to such availability or the prices thereof.





We also
purchase various other materials, including natural and butyl rubber, tackifying
resins, chemicals and adhesives, paper and packaging materials, polyester
staple, raw cotton, linerboard and kraft, woven and non-woven cloth and
foil.  These materials are generally available from a number of
suppliers.





Employees





At the
end of fiscal 2009, we employed approximately
13,200 employees.  Approximately 4% of our employees are covered
by collective bargaining agreements. One of the agreements, covering
approximately 91 employees, is scheduled for renegotiation in fiscal
2010.   The remaining agreements expire after fiscal 2010.  Our
relations with employees remain satisfactory.


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Patents
and Trademarks





We rely
on a combination of patents, trade secrets, unpatented know-how, trademarks,
copyrights and other intellectual property rights, nondisclosure agreements and
other protective measures to protect our proprietary rights.  We do
not believe that any individual item of our intellectual property portfolio is
material to our current business.  We employ various methods,
including confidentiality and non-disclosure agreements with third parties,
employees and consultants, to protect our trade secrets and
know-how.  We have licensed, and may license in the future, patents,
trademarks, trade secrets, and similar proprietary rights to and from third
parties.







Environmental
Matters and Government Regulation





Our past
and present operations and our past and present ownership and operations of real
property are subject to extensive and changing federal, state, local and foreign
environmental laws and regulations pertaining to the discharge of materials into
the environment, the handling and disposition of wastes, and cleanup of
contaminated soil and ground water, or otherwise relating to the protection of
the environment.  We believe that we are in substantial compliance
with applicable environmental laws and regulations.  However, we
cannot predict with any certainty that we will not in the future incur
liability, which could be significant under environmental statutes and
regulations with respect to non-compliance with environmental laws,
contamination of sites formerly or currently owned or operated by us (including
contamination caused by prior owners and operators of such sites) or the
off-site disposal of regulated materials, which could be material.





We may
from time to time be required to conduct remediation of releases of regulated
materials at our owned or operated facilities.  None of our pending
remediation projects are expected to result in material costs.  Like
any manufacturer, we are also subject to the possibility that we may receive
notices of potential liability in connection with materials that were sent to
third-party recycling, treatment, and/or disposal facilities under the Federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, (“CERCLA”), and comparable state statutes, which impose liability for
investigation and remediation of contamination without regard to fault or the
legality of the conduct that contributed to the contamination, and for damages
to natural resources.  Liability under CERCLA is retroactive, and,
under certain circumstances, liability for the entire cost of a cleanup can be
imposed on any responsible party.  No such notices are currently
pending which are expected to result in material costs.





The Food
and Drug Administration (“FDA”) regulates the material content of direct-contact
food and drug packages, including certain packages we manufacture pursuant to
the Federal Food, Drug and Cosmetics Act.  Certain of our products are
also regulated by the Consumer Product Safety Commission (“CPSC”) pursuant to
various federal laws, including the Consumer Product Safety Act and the Poison
Prevention Packaging Act.  Both the FDA and the CPSC can require the
manufacturer of defective products to repurchase or recall such products and may
also impose fines or penalties on the manufacturer.  Similar laws
exist in some states, cities and other countries in which we sell our
products.  In addition, laws exist in certain states restricting the
sale of packaging with certain levels of heavy metals, imposing fines and
penalties for non-compliance.  Although we use FDA approved resins and
pigments in our products that directly contact food and drug products and
believe they are in material compliance with all such applicable FDA
regulations, and we believe our products are in material compliance with all
applicable requirements, we remain subject to the risk that our products could
be found not to be in compliance with such requirements.





The
plastics industry, including us, is subject to existing and potential federal,
state, local and foreign legislation designed to reduce solid wastes by
requiring, among other things, plastics to be degradable in landfills, minimum
levels of recycled content, various recycling requirements, disposal fees and
limits on the use of plastic products.  In particular, certain states
have enacted legislation requiring products packaged in plastic containers to
comply with standards intended to encourage recycling and increased use of
recycled materials.  In addition, various consumer and special
interest groups have lobbied from time to time for the implementation of these
and other similar measures.  We believe that the legislation
promulgated to date and such initiatives to date have not had a material adverse
effect on us.  There can be no assurance that any such future
legislative or regulatory efforts or future initiatives would not have a
material adverse effect on us.





Available
Information


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





Item
1A.                      RISK
FACTORS





Our
substantial indebtedness could affect our ability to meet our obligations and
may otherwise restrict our activities.




We have a
significant amount of indebtedness.  At the end of fiscal 2009, we had
a total indebtedness of $3,359.7 million with cash and cash equivalents totaling
$10.0 million.  We would have been able to borrow a further $279.0
million under the revolving portion of our senior secured credit facilities
subject to the solvency of our lenders to fund their obligations and our
borrowing base calculations.  We are permitted by the terms of our
debt instruments to incur substantial additional indebtedness, subject to the
restrictions therein.  Our inability to generate sufficient cash flow
to satisfy our debt obligations, or to refinance our obligations on commercially
reasonable terms, would have a material adverse effect on our business,
financial condition and results of operations.




Our
substantial indebtedness could have important consequences.  For
example, it could:




·
            make
      it more difficult for us to satisfy our obligations under our
      indebtedness;




·
            limit
      our ability to borrow money for our working capital, capital expenditures,
      debt service requirements or other corporate
  purposes;




·
            require
      us to dedicate a substantial portion of our cash flow to payments on our
      indebtedness, which would reduce the amount of cash flow available to fund
      working capital, capital expenditures, product development and other
      corporate requirements;




·
            increase
      our vulnerability to general adverse economic and industry
      conditions;




·
            limit
      our ability to respond to business opportunities;
  and




·
            subject
      us to financial and other restrictive covenants, which, if we fail to
      comply with these covenants and our failure is not waived or cured, could
      result in an event of default under our
debt.




Increases
in resin prices or a shortage of available resin could harm our financial
condition and results of operations.




To
produce our products, we use large quantities of plastic
resins.  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.  Over the past several years, we have at times experienced
rapidly increasing resin prices.  If rapid increases in resin prices
continue, our revenue and profitability may be materially and adversely
affected, both in the short-term as we attempt to pass through changes in the
price of resin to customers under current agreements and in the long-term as we
negotiate new agreements or if our customers seek product
substitution.





We source
plastic resin primarily from major industry suppliers such as Chevron, DAK
Americas, Dow, Dupont, Eastman Chemical, Exxon Mobil, Flint Hills Resources,
Georgia Gulf, Lyondell/Bassell, Nova, PolyOne Corp., Sunoco, Total, and
Westlake.  We have long-standing relationships with certain of these
suppliers but have not entered into a firm supply contract with any of
them.  We may not be able to arrange for other sources of resin in the
event of an industry-wide general shortage of resins used by us, or a shortage
or discontinuation of certain types of grades of resin purchased from one or
more of our suppliers.  Any such shortage may materially negatively
impact our competitive position versus companies that are able to better or more
cheaply source resin.


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We
may not be able to compete successfully and our customers may not continue to
purchase our products.




We face
intense competition in the sale of our products and compete with multiple
companies in each of our product lines.  We compete on the basis of a
number of considerations, including price, service, quality, product
characteristics and the ability to supply products to customers in a timely
manner.  Our products also compete with metal, glass, paper and other
packaging materials as well as plastic packaging materials made through
different manufacturing processes.  Some of these competitive products
are not subject to the impact of changes in resin prices which may have a
significant and negative impact on our competitive position versus substitute
products.  Our competitors may have financial and other resources that
are substantially greater than ours and may be better able than us to withstand
price competition.  In addition, some of our customers do and could in
the future choose to manufacture the products they require for
themselves.  Each of our product lines faces a different competitive
landscape.  Competition could result in our products losing market
share or our having to reduce our prices, either of which would have a material
adverse effect on our business and results of operations and financial
condition.  In addition, since we do not have long-term arrangements
with many of our customers these competitive factors could cause our customers
to shift suppliers and/or packaging material quickly.





We
may pursue and execute acquisitions, which could adversely affect our
business.





As part
of our growth strategy, we plan to consider the acquisition of other companies,
assets and product lines that either complement or expand our existing business
and create economic value.  We cannot assure you that we will be able
to consummate any such transactions or that any future acquisitions will be
consummated at acceptable prices and terms.  We continually evaluate
potential acquisition opportunities in the ordinary course of business,
including those that could be material in size and
scope.  Acquisitions involve a number of special risks,
including:







·
            the
      diversion of management’s attention to the assimilation of the acquired
      companies and their employees and on the management of expanding
      operations;




·
            the
      incorporation of acquired products into our product
  line;




·
            the
      increasing demands on our operational
systems;




·
            possible
      adverse effects on our reported operating results, particularly during the
      first several reporting periods after such acquisitions are completed;
      and




·
            the
      loss of key employees and the difficulty of presenting a unified corporate
      image.







We may
become responsible for unexpected liabilities that we failed or were unable to
discover in the course of performing due diligence in connection with historical
acquisitions and any future acquisitions.  We have typically required
selling stockholders to indemnify us against certain undisclosed
liabilities.  However, we cannot assure you that indemnification
rights we have obtained, or will in the future obtain, will be enforceable,
collectible or sufficient in amount, scope or duration to fully offset the
possible liabilities associated with the business or property
acquired.  Any of these liabilities, individually or in the aggregate,
could have a material adverse effect on our business, financial condition and
results of operations.





In
addition, we may not be able to successfully integrate future acquisitions
without substantial costs, delays or other problems.  The costs of
such integration could have a material adverse effect on our operating results
and financial condition.  Although we conduct what we believe to be a
prudent level of investigation regarding the businesses we purchase, in light of
the circumstances of each transaction, an unavoidable level of risk remains
regarding the actual condition of these businesses.  Until we actually
assume operating control of such business assets and their operations, we may
not be able to ascertain the actual value or understand the potential
liabilities of the acquired entities and their operations.







We
may not be successful in protecting our intellectual property rights, including
our unpatented proprietary know-how and trade secrets, or in avoiding claims
that we infringed on the intellectual property rights of others.




In
addition to relying on patent and trademark rights, we rely on unpatented
proprietary know-how and trade secrets, and


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employ
various methods, including confidentiality agreements with employees and
consultants, to protect our know-how and trade secrets.  However,
these methods and our patents and trademarks may not afford complete protection
and there can be no assurance that others will not independently develop the
know-how and trade secrets or develop better production methods than
us.  Further, we may not be able to deter current and former
employees, contractors and other parties from breaching confidentiality
agreements and misappropriating proprietary information and it is possible that
third parties may copy or otherwise obtain and use our information and
proprietary technology without authorization or otherwise infringe on our
intellectual property rights.  Additionally, we have licensed, and may
license in the future, patents, trademarks, trade secrets, and similar
proprietary rights to third parties.  While we attempt to ensure that
our intellectual property and similar proprietary rights are protected when
entering into business relationships, third parties may take actions that could
materially and adversely affect our rights or the value of our intellectual
property, similar proprietary rights or reputation.  In the future, we
may also rely on litigation to enforce our intellectual property rights and
contractual rights, and, if not successful, we may not be able to protect the
value of our intellectual property.  Any litigation could be
protracted and costly and could have a material adverse effect on our business
and results of operations regardless of its outcome.





Our
success depends in part on our ability to obtain, or license from third parties,
patents, trademarks, trade secrets and similar proprietary rights without
infringing on the proprietary rights of third parties.  Although we
believe our intellectual property rights are sufficient to allow us to conduct
our business without incurring liability to third parties, our products may
infringe on the intellectual property rights of such
persons.  Furthermore, no assurance can be given that we will not be
subject to claims asserting the infringement of the intellectual property rights
of third parties seeking damages, the payment of royalties or licensing fees
and/or injunctions against the sale of our products.  Any such
litigation could be protracted and costly and could have a material adverse
effect on our business and results of operations.





Current
and future environmental and other governmental requirements could adversely
affect our financial condition and our ability to conduct our
business.





Our
operations are subject to federal, state, local and foreign environmental laws
and regulations that impose limitations on the discharge of pollutants into the
air and water and establish standards for the treatment, storage and disposal of
solid and hazardous wastes and require cleanup of contaminated
sites.  While we have not been required historically to make
significant capital expenditures in order to comply with applicable
environmental laws and regulations, we cannot predict with any certainty our
future capital expenditure requirements because of continually changing
compliance standards and environmental technology.  Furthermore,
violations or contaminated sites that we do not know about (including
contamination caused by prior owners and operators of such sites) (or newly
discovered information) could result in additional compliance or remediation
costs or other liabilities, which could be material.  We have limited
insurance coverage for potential environmental liabilities associated with
historic and current operations and we do not anticipate increasing such
coverage in the future.  We may also assume significant environmental
liabilities in acquisitions.  In addition, federal, state, local and
foreign governments could enact laws or regulations concerning environmental
matters that increase the cost of producing, or otherwise adversely affect the
demand for, plastic products.  Legislation that would prohibit, tax or
restrict the sale or use of certain types of plastic and other containers, and
would require diversion of solid wastes such as packaging materials from
disposal in landfills, has been or may be introduced in the U.S. Congress, in
state legislatures and other legislative bodies.  While container
legislation has been adopted in a few jurisdictions, similar legislation has
been defeated in public referenda in several states, local elections and many
state and local legislative sessions.  Although we believe that the
laws promulgated to date have not had a material adverse effect on us, there can
be no assurance that future legislation or regulation would not have a material
adverse effect on us.  Furthermore, a decline in consumer preference
for plastic products due to environmental considerations could have a negative
effect on our business.


The Food
and Drug Administration (“FDA”) regulates the material content of direct-contact
food and drug packages we manufacture pursuant to the Federal Food, Drug and
Cosmetic Act.  Furthermore, some of our products are regulated by the
Consumer Product Safety Commission (“CPSC”) pursuant to various federal laws,
including the Consumer Product Safety Act and the Poison Prevention Packaging
Act.  Both the FDA and the CPSC can require the manufacturer of
defective products to repurchase or recall these products and may also impose
fines or penalties on the manufacturer.  Similar laws exist in some
states, cities and other countries in which we sell products.  In
addition, laws exist in certain states restricting the sale of packaging with
certain levels of heavy metals and imposing fines and penalties for
noncompliance.  Although we use FDA-approved resins and pigments in
our products that directly contact food and drug products and we believe our
products are in material compliance with all applicable requirements, we
remain


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subject
to the risk that our products could be found not to be in compliance with these
and other requirements.  A recall of any of our products or any fines
and penalties imposed in connection with non-compliance could have a materially
adverse effect on us.  See “Business—Environmental Matters and
Government Regulation.”





In
the event of a catastrophic loss of one of our key manufacturing facilities, our
business would be adversely affected.





While we
manufacture our products in a large number of diversified facilities and
maintain insurance covering our facilities, including business interruption
insurance, a catastrophic loss of the use of all or a portion of one of our key
manufacturing facilities due to accident, labor issues, weather conditions,
natural disaster or otherwise, whether short or long-term, could have a material
adverse effect on us.





Our
business operations could be significantly disrupted if members of our senior
management team were to leave.





Our
success depends to a significant degree upon the continued contributions of our
senior management team.  Our senior management team has extensive
manufacturing, finance and engineering experience, and we believe that the depth
of our management team is instrumental to our continued
success.  While we have entered into employment agreements with
certain executive officers, the loss of any of our key executive officers in the
future could significantly impede our ability to successfully implement our
business strategy, financial plans, expansion of services, marketing and other
objectives.





Goodwill
and other intangibles represent a significant amount of our net worth, and a
write-off could result in lower reported net income and a reduction of our net
worth.





At the
end of fiscal 2009, the net value of our goodwill and other intangibles was
$2,538.6million.  We
are no longer required or permitted to amortize goodwill reflected on our
balance sheet.  We are, however, required to evaluate goodwill
reflected on our balance sheet when circumstances indicate a potential
impairment, or at least annually, under the impairment testing guidelines
outlined in the standard.  Future changes in the cost of capital,
expected cash flows, or other factors may cause our goodwill to be impaired,
resulting in a non-cash charge against results of operations to write-off
goodwill for the amount of impairment.  If a significant write-off is
required, the charge would have a material adverse effect on our reported
results of operations and net worth in the period of any such
write-off.





We
are controlled by funds affiliated with Apollo Management, L.P. and its
interests as an equity holder may conflict with yours.





A
majority of the common stock of our parent company, Berry Plastics Group, Inc.
(“Berry Group”), is held by funds affiliated with Apollo Management, L.P.
(“Apollo”).  Funds affiliated with Apollo control Berry Group and
therefore us as a wholly owned subsidiary of Berry Group.  As a
result, Apollo has the power to elect a majority of the members of our board of
directors, appoint new management and approve any action requiring the approval
of the holders of Berry Group’s stock, including approving acquisitions or sales
of all or substantially all of our assets.  The directors elected by
Apollo have the ability to control decisions affecting our capital structure,
including the issuance of additional capital stock, the implementation of stock
repurchase programs and the declaration of dividends.  Apollo’s
interests may not in all cases be aligned with your interests.  For
example, if we encounter financial difficulties or are unable to pay our debts
as they mature, Apollo’s interests, as equity holders, might conflict with your
interests.  Affiliates of Apollo may also have an interest in pursuing
acquisitions, divestitures, financings and other transactions that, in their
judgment, could enhance their equity investments, even though such transactions
might involve risks to you.  Additionally, Apollo is in the business
of investing in companies and may, from time to time, acquire and hold interests
in businesses that compete directly or indirectly with
us.  Furthermore, Apollo has no continuing obligation to provide us
with debt or equity financing or to provide us with joint purchasing or similar
opportunities with its other portfolio companies.  Apollo may also
pursue acquisition opportunities that may be complementary to our business and,
as a result, those acquisition opportunities may not be available to
us.





The
recent disruptions in the overall economy and the financial markets may
adversely impact our business.





Our
industry has been affected by current economic factors, including the
deterioration of national, regional and local economic conditions, declines in
employment levels, and shifts in consumer spending patterns.  The
recent disruptions


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in the
overall economy and volatility in the financial markets have reduced, and may
continue to reduce, consumer confidence in the economy, negatively affecting
consumer spending, which could be harmful to our financial position and results
of operations.  As a result, decreased cash flow generated from our
business may adversely affect our financial position and our ability to fund our
operations.  In addition, macro economic disruptions, as well as the
restructuring of various commercial and investment banking organizations, could
adversely affect our ability to access the credit markets.  The
disruption in the credit markets may also adversely affect the availability of
financing for our operations.  There can be no assurance that
government responses to the disruptions in the financial markets will restore
consumer confidence, stabilize the markets, or increase liquidity and the
availability of credit.





Item
1B.  UNRESOLVED STAFF COMMENTS





None





Item
2.  PROPERTIES





We
believe that our property and equipment is well-maintained, in good operating
condition and adequate for our present needs.  The following table
sets forth our principal manufacturing facilities, at the end of fiscal
2009:


Location
            Square Footage(1)
            Owned/Leased
            
            Location
            Square Footage(1)
            Owned/LeasedAarschot,
      Belgium
            70.6
            Leased
            
            Hanover,
      MD
            117.0
            LeasedAhoskie,
      NC
            150.0
            Owned
            
            Henderson,
      NV
            175.0
            OwnedAlbertville,
      AL
            318.0
            Owned
            
            Homer,
      LA
            186.0
            OwnedAtlacomulco,
      Mexico
            116.3
            Owned
            
            Houston,
      TX
            18.0
            OwnedAnaheim,
      CA
            248.0
            Leased
            
            Iowa
      Falls, IA
            100.0
            OwnedAtlanta,
      GA
            100.0
            Leased
            
            Jackson,
      TN
            211.0
            LeasedAurora,
      IL
            66.9
            Leased
            
            Lakeville,
      MN
            200.0
            OwnedBaltimore,
      MD
            244.0
            Leased
            
            Lathrop,
      CA
            173.5
            LeasedBaroda,
      India
            24.2
            Owned
            
            Lawrence,
      KS
            424.0
            LeasedBattleboro,
      NC
            390.7
            Owned
            
            Louisville,
      KY
            90.0
            LeasedBeaumont,
      TX
            42.3
            Owned
            
            Middlesex,
      NJ
            29.0
            OwnedBelleville,
      Canada
            46.0
            Owned
            
            Monroe,
      LA
            452.5
            OwnedBowling
      Green, KY
            168.0
            Leased
            
            Monroeville,
      OH
            350.0
            OwnedBremen,
      GA
            140.0
            Owned
            
            Peosta,
      IA
            111.0
            LeasedBristol,
      RI
            23.0
            Owned
            
            Phillipsburg,
      NJ
            87.5
            LeasedCharlotte,
      NC
            150.0
            Owned
            
            Phoenix,
      AZ
            266.0
            LeasedCharlotte,
      NC
            53.1
            Leased
            
            Phoenix,
      AZ
            100.0
            LeasedChicago,
      IL
            472.0
            Leased
            
            Piscataway,
      NJ
            250.0
            LeasedColumbus,
      GA
            70.0
            Owned
            
            Pryor,
      OK
            198.0
            OwnedConstantine,
      MI
            144.0
            Owned
            
            Quad
      Cities, IA
            180.0
            LeasedCoon
      Rapids, MN
            64.9
            Owned
            
            Richmond,
      IN
            160.0
            OwnedCovington,
      GA
            306.9
            Owned
            
            Sarasota,
      FL
            74.0
            OwnedCranbury,
      NJ
            204.0
            Leased
            
            Sioux
      Falls, SD
            230.0
            OwnedDoswell,
      VA
            249.5
            Owned
            
            Streetsboro,
      OH
            140.0
            OwnedDunkirk,
      NY
            125.0
            Owned
            
            Suffolk,
      VA
            110.0
            OwnedEasthampton,
      MA
            210.0
            Leased
            
            Syracuse,
      NY
            215.0
            LeasedEastport,
      VA
            173.4
            Leased
            
            Tacoma,
      WA
            77.0
            LeasedElizabeth,
      NJ
            46.3
            Leased
            
            Tijuana,
      Mexico
            260.8
            OwnedEvansville,
      IN (2)
            775.0
            Leased
            
            Vancouver,
      WA
            23.0
            LeasedFranklin,
      KY
            513.0
            Owned
            
            Victoria,
      TX
            190.0
            OwnedGreenville,
      SC
            70.0
            Owned
            
            Waterloo,
      Canada
            102.0
            OwnedGoshen,
      IN
            125.0
            Owned
            
            Woodstock,
      IL
            170.0
            Owned11,370.4








(1)
Square footage in thousands.


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(2) The
Evansville, IN facility also serves as the Company’s world
headquarters.





Item
3.  LEGAL PROCEEDINGS





We are
party to various legal proceedings involving routine claims which are incidental
to our business. Although our legal and financial liability with respect to such
proceedings cannot be estimated with certainty, we believe that any ultimate
liability would not be material to the business, financial condition, results of
operations or cash flows of the Company.





Item
4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS





None.





PART
II




Item
5.     MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER


MATTERS, AND
ISSUER PURCHASES OF EQUITY SECURITIES




There is
no established public trading market for any class of common stock of Berry
Plastics Corporation or Berry Plastics Group, Inc.  All of the issued
and outstanding common stock of the Berry Plastics Corporation is held by Berry
Plastics Group, Inc.  With respect to the capital stock of Berry
Group, as of November 19, 2009, there were approximately 450 holders of the
common stock.





On June
7, 2007, Berry Group’s Board of Directors declared a special one-time dividend
of $77 per common share to shareholders of record as of June 6,
2007.  The dividend was paid June 8, 2007.  In connection
with this dividend, the Company paid a dividend of approximately $87.0 million
to Berry Group.  This dividend reduced Berry Group’s shareholders
equity for owned shares by $530.2 million.  In connection with this
dividend payment, approximately $34.5 million related to unvested stock options
was placed in escrow and was subject to time based vesting through June 7,
2009.  In December 2008, the Executive Committee of Berry Group
modified the vesting provisions related to the remaining $33.0 million being
held in escrow.  This resulted in the immediate vesting and
accelerating the recognition of the remaining unrecorded stock compensation
expense of $11.4 million in selling, general and administrative expenses
recorded in the first fiscal quarter of 2009.





See Item
12 of this Form 10-K entitled “Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters” and Footnote 12 to our
consolidated financial statements regarding equity compensation plan
information.





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Item
6.   SELECTED FINANCIAL DATA





The
following table presents selected historical financial data for Berry and Tyco
Plastics & Adhesives (Predecessor) and should be read in conjunction with,
and is qualified by reference to, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and the respective financial
statements and notes to the financial statements included elsewhere in this Form
10-K.  The historical financial statements of Berry Plastics
Corporation and Covalence Specialty Materials Holding Corp. (“Covalence”) prior
to merger are included in Form S-4’s filed by the Company on May 6, 2008 and May
4, 2007, respectively.





The
selected historical financial data of Tyco Plastics & Adhesives have been
derived from the audited financial statements that were prepared in accordance
with GAAP.  These financial statements have been prepared on a
going-concern basis, as if certain assets of Tyco Plastics & Adhesives,
which were acquired by Covalence Specialty Materials Corp. and its affiliates on
February 16, 2006, had existed as an entity separate from Tyco during the
periods presented.  Tyco charged the predecessor operations a portion
of its corporate support costs, including engineering, legal, treasury,
planning, environmental, tax, auditing, information technology and other
corporate services, based on usage, actual costs or other allocation methods
considered reasonable by Tyco management.  Accordingly, expenses
included in the financial statements may not be indicative of the level of
expenses which might have been incurred had the predecessor been operating as a
separate stand-alone company.





Successor
            
            
            Predecessor($
      in millions)
            
            Year
      ended
                September
      26,
                2009
            
            
            Year
      ended
                September
      27,
                2008
            
            
            Year
      ended
                September
      29,
                2007
            
            
            Period
      from
                February
      17
                to
                September 30,
      2006
            
            
            Period
      from
                October
      1,
                2005
      to
                February
      16,
                2006
            
            
            Year
      ended
                September
      29,
                2005Statement
      of Operations Data:Net
      sales(1)
            
            $
            3,187.1
            
            
            $
            3,513.1
            
            
            $
            3,055.0
            
            
            $
            1,138.8
            
            
            $
            666.9
            
            
            $
            1,725.2Cost
      of sales
            
            
            2,641.1
            
            
            
            3,019.3
            
            
            
            2,583.4
            
            
            
            1,022.9
            
            
            
            579.0
            
            
            
            1,477.4Gross
      profit
            
            
            546.0
            
            
            
            493.8
            
            
            
            471.6
            
            
            
            115.9
            
            
            
            87.9
            
            
            
            247.8Charges
      and allocations from Tyco and affiliates
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            10.4
            
            
            
            56.4Selling,
      general and administrative expenses
            
            
            325.2
            
            
            
            340.0
            
            
            
            321.5
            
            
            
            107.6
            
            
            
            50.0
            
            
            
            124.6Restructuring
      and impairment charges, net
            
            
            11.3
            
            
            
            9.6
            
            
            
            39.1
            
            
            
            0.6
            
            
            
            0.6
            
            
            
            3.3Other
      operating expenses
            
            
            23.7
            
            
            
            32.8
            
            
            
            43.6
            
            
            
            —
            
            
            
            —
            
            
            
            —Operating
      income
            
            
            185.8
            
            
            
            111.4
            
            
            
            67.4
            
            
            
            7.7
            
            
            
            26.9
            
            
            
            63.5Other
      expense (income)
            
            
            (30.4
            )
            
            
            —
            
            
            
            37.3
            
            
            
            12.3
            
            
            
            —
            
            
            
            —Interest
      expense
            
            
            262.8
            
            
            
            262.3
            
            
            
            239.8
            
            
            
            46.5
            
            
            
            7.6
            
            
            
            15.7Interest
      income
            
            
            (18.3
            )
            
            
            (0.6
            )
            
            
            (2.2
            )
            
            
            —
            
            
            
            —
            
            
            
            —Income
      (loss) before income taxes
            
            
            (28.3
            )
            
            
            (150.3
            )
            
            
            (207.5
            )
            
            
            (51.1
            )
            
            
            19.3
            
            
            
            47.8Income
      tax expense (benefit)
            
            
            (6.3
            )
            
            
            (49.2
            )
            
            
            (88.6
            )
            
            
            (18.1
            )
            
            
            1.6
            
            
            
            3.8Minority
      interest
            
            
            —
            
            
            
            —
            
            
            
            (2.7
            )
            
            
            (1.8
            )
            
            
            —
            
            
            
            —Loss
      on discontinued operations
            
            
            4.2
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Net
      income (loss)
            
            $
            (26.2
            )
            
            $
            (101.1
            )
            
            $
            (116.2
            )
            
            $
            (31.2
            )
            
            $
            17.7
            
            
            $
            44.0Balance
      Sheet Data (at period end):Cash
      and cash equivalents
            
            $
            10.0
            
            
            $
            189.7
            
            
            $
            14.6
            
            
            $
            83.1
            
            
            $
            4.9
            
            
            $
            2.7Property,
      plant and equipment, net
            
            
            875.6
            
            
            
            862.8
            
            
            
            785.0
            
            
            
            816.6
            
            
            
            275.6
            
            
            
            283.1Total
      assets
            
            
            4,401.0
            
            
            
            4,724.1
            
            
            
            3,869.4
            
            
            
            3,821.4
            
            
            
            1,279.5
            
            
            
            1,206.7Long-term
      debt obligations
            
            
            3,342.2
            
            
            
            3,578.2
            
            
            
            2,693.3
            
            
            
            2,612.3
            
            
            
            —
            
            
            
            —Stockholders’
      equity
            
            
            321.7
            
            
            
            351.9
            
            
            
            450.0
            
            
            
            409.6
            
            
            
            877.7
            
            
            
            855.1Cash
      Flow and other Financial Data:Net
      cash provided by (used in) operating activities
            
            $
            414.4
            
            
            $
            9.8
            
            
            $
            137.3
            
            
            $
            96.7
            
            
            $
            (119.2
            )
            
            $
            117.3Net
      cash used in investing activities
            
            
            (364.2
            )
            
            
            (655.6
            )
            
            
            (164.3
            )
            
            
            (3,252.0
            )
            
            
            (9.1
            )
            
            
            (29.2
            )Net
      cash provided by (used in) financing activities
            
            
            (229.7
            )
            
            
            821.0
            
            
            
            (40.4
            )
            
            
            3,212.5
            
            
            
            130.6
            
            
            
            (89.2
            )Capital
      expenditures
            
            
            194.4
            
            
            
            162.4
            
            
            
            99.3
            
            
            
            34.8
            
            
            
            12.2
            
            
            
            32.1





(1)
            Net
      sales includes related party sales of $11.6 million for the period from
      October 1, 2005 to February 16, 2006 and $23.4 million for the year ended
      September 30, 2005.  Additionally, revenue is presented net of
      certain rebates paid to customers.





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Item
      7.
            MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS








You
should read the following discussion in conjunction with the consolidated
financial statements of Berry 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 the “Risk
Factors” section.  Our actual results may differ materially from those
contained in any forward-looking statements.





Overview





In
December 2007, Berry Plastics Holding Corporation completed an internal entity
restructuring.  Pursuant to this restructuring, effective December 28,
2007, Berry Plastics Corporation converted to Berry Plastics, LLC and then
merged with and into Berry Plastics Holding Corporation.  In addition,
Berry Plastics Holding Corporation changed its name to Berry Plastics
Corporation (“Berry” or the “Company”).  References herein to “we”,
“us”, the “Company”, “Berry”, and “Berry Plastics” refer to Berry Plastics
Group, Inc (“Berry Group”) and its consolidated subsidiaries, including Berry,
after giving effect to the transactions.





We
believe we are one of the world’s leading manufacturer and marketers of plastic
packaging products, plastic film products, specialty adhesives and coated
products.  We manufacture a broad range of innovative, high quality
packaging solutions using our collection of over 2,200 proprietary molds and an
extensive set of internally developed processes and technologies. Our principal
products include containers, drink cups, bottles, closures and overcaps, tubes,
prescription containers, trash bags, stretch films, plastic sheeting and tapes
which we sell into a diverse selection of attractive and stable end markets,
including food and beverage, healthcare, personal care, quick service and family
dining restaurants, custom and retail, agricultural, horticultural,
institutional, industrial, construction, aerospace and automotive.  We
sell our packaging solutions to approximately 13,000 customers, ranging from
large multinational corporations to small local businesses comprised of a
favorable balance of leading national blue-chip customers as well as a
collection of smaller local specialty businesses.  We believe that we
are one of the largest global purchasers of PE resin, our principal raw
material, processing approximately one billion pounds annually.  We
believe that our proprietary tools and technologies, low-cost manufacturing
capabilities and significant operating and purchasing scale provide us with a
competitive advantage in the marketplace. Our unique combination of leading
market positions, proven management team, product and customer diversity and
manufacturing and design innovation provides access to a variety of growth
opportunities. Our top 10 customers represented approximately 21% of our fiscal
2009 net sales with no customer


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accounting
for more than 6% of our fiscal 2009 net sales.  The average length of
our relationship with these customers was over 20 years. Additionally, we
operate more than 60 strategically located manufacturing facilities and have
extensive distribution capabilities.  At the end of fiscal 2009, we
had approximately 13,200 employees.





Executive
Summary





Business.
The Company is organized into four operating segments: Rigid Open Top, Rigid
Closed Top, Flexible Films and Tapes and Coatings.  The Rigid Open Top
division sells products in three categories including containers, foodservice
items and home and party.  The Rigid Closed Top division sells
products in three categories including closures and overcaps, bottles and
prescription containers and tubes.  The Flexible Films division sells
primarily plastic trash bags, stretch film and plastic sheeting to the
agricultural, horticultural, institutional, foodservice and retail
markets.  Our Tapes and Coatings division sells specialty adhesive
products and flexible packaging and building materials to a variety of different
industries including building and construction, retail, automotive, industrial
and medical markets.





Some of
our key accomplishments in fiscal 2009 included: generating $414.4 million of
cash from operating activities, both from a reduction of working capital and
improvement to operations; rationalizing multiple production facilities without
disruption to customers; committing substantial capital to upgrading equipment
for expansion and cost reduction in each operating segment; implemented numerous
cost reduction programs; continued integration efforts and realization of
synergies related to our prior mergers and acquisitions.





Raw Material
Trends.Our primary raw material
is plastic resin.  Polypropylene and polyethylene account for more
than 80% of our plastic resin purchases based on the pounds
purchased.  The average industry prices, as published in industry
sources, per pound were as follows:





Polyethylene
      Butene Film
            
            
            Polypropylene2010
            
            
            2009
            
            
            2008
            
            
            2007
            
            
            2010
            
            
            2009
            
            
            2008
            
            
            20071st
      quarter
            
            $
            .70
            
            
            $
            .67
            
            
            $
            .82
            
            
            $
            .64
            
            
            $
            .66
            
            
            $
            .56
            
            
            $
            .85
            
            
            $
            .712nd
      quarter
            
            
            .68
            
            
            
            .59
            
            
            
            .84
            
            
            
            .63
            
            
            
            .66
            
            
            
            .46
            
            
            
            .80
            
            
            
            .713rd
      quarter
            
            
            .64
            
            
            
            .64
            
            
            
            .91
            
            
            
            .69
            
            
            
            .68
            
            
            
            .53
            
            
            
            .89
            
            
            
            .774th
      quarter
            
            
            .65
            
            
            
            .68
            
            
            
            1.00
            
            
            
            .75
            
            
            
            .74
            
            
            
            .67
            
            
            
            .99
            
            
            
            .79







Plastic
resins are subject to price fluctuations, including those arising from supply
shortages and changes in the prices of natural gas, crude oil and other
petrochemical intermediates from which resins are produced.





Outlook.The Company is impacted
by general economic and industrial growth, housing starts, automotive builds,
plastic resin availability and affordability, and general industrial production.
Our business has both geographic and end market diversity which reduces the
impact of any one of these factors on our overall performance. We are impacted
by our ability to maintain selling price increases, raw material pricing and
volume growth of our customers.  We expect continued strength in our
thermoforming product lines, which would have a positive impact on volumes in
our Rigid Open Top segment.  We expect our bottle business to continue
to grow with an increasing amount of quoting activity and strong new product
pipeline, which would have a positive impact in or Rigid Closed Top
segment.  Flexible segments continue to be extremely competitive as a
result of excess capacity in the housing products markets.  We
anticipate continued softness in U.S. housing starts in 2010 that will impact in
both our Tapes and Coatings and Flexible Films segments.  We also
anticipate continued softness in 2010 in North American automotive build rates
which will impact various product lines in our Tapes and Coatings
segment.  We continually focus on improving our overall profitability
by implementing cost reduction programs for our manufacturing, selling, general
and administrative expenses on an annual basis.





Recent
Developments





In
October 2009, we announced our intention to acquire the equity of Pliant
Corporation (“Pliant”) upon its emergence from reorganization pursuant to a
proceeding under Chapter 11 of the Bankruptcy Code. If the acquisition is
completed, Pliant would be a wholly owned subsidiary of Berry
Plastics.  Pliant is a leading manufacturer of value-added films and
flexible packaging for food, personal care, medical, agricultural and industrial
applications with annual net sales of


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$1,127.6
million in calendar 2008. Pliant manufactures key components in a wide variety
of flexible packaging products for use in end-use markets such as coffee,
confections, snacks, fresh produce, lidding, and hot-fill liquids as well as
providing printed rollstock, bags and sheets used to package consumer goods.
Pliant also offers a diverse product line of film industry-related products and
has achieved leading positions in many of these product lines.





In
November 2009, in order to fund the $561.0 million Pliant acquisition estimated
purchase price, two of our unrestricted subsidiaries completed a
private placement of $370.0 million aggregate principal amount of 8 1⁄4% First
Priority Senior Secured Notes due on November 15, 2015 and $250.0 million
aggregate principal amount of 87⁄8%Second
Priority Senior Secured Notes due on September 15, 2014.  In light of
the conditions required to effect the proposed Pliant acquisition including
customary antitrust approvals, the gross proceeds of $596.3 million, before fees
and expenses, from this offering were placed into segregated escrow collateral
accounts pending our right to acquire the equity of Pliant upon emergence
from bankruptcy.  Therefore, if the Pliant acquisition does not occur
prior to January 29, 2010, or such earlier date as we determine at our sole
discretion that any of the offering escrow conditions cannot be satisfied, then
these Notes will be subject to a special mandatory redemption at a price equal
to 100% of the gross proceeds of such Notes, plus accrued and unpaid interest
to, but not including, the date of redemption.  As part of acquisition
of Pliant, the offering we expect to increase the amount of our lender
commitments under our revolving credit facility by $100 million.





In
November 2009, we entered into a definitive agreement to acquire 100% of the
outstanding common stock of Superfos Packaging, Inc., a manufacturer of
injection molded plastic rigid open top containers and other plastic packaging
products for the food, industrial and household chemical, building materials and
personal care end markets which had 2008 annual net sales of $46.8
million.  The purchase price is approximately $82 million and will be
funded from cash on hand or existing credit facilities.





Acquisitions,
Disposition and Facility Rationalizations





We
maintain a selective and disciplined acquisition strategy, which is focused on
improving our long term financial performance, enhancing our market positions
and expanding our product lines or, in some cases, providing us with a new or
complementary product line.  Most businesses we have acquired had
profit margins that are lower than that of our existing business, which resulted
in a temporary decrease in our margins.  We have historically achieved
significant reductions in manufacturing and overhead costs of acquired companies
by introducing advanced manufacturing processes, exiting low-margin businesses
or product lines, reducing headcount, rationalizing facilities and machinery,
applying best practices and capitalizing on economies of scale.  In
connection with our acquisitions, we have in the past and may in the future
incur charges related to these reductions and rationalizations.




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





The
Company has included the expected benefits of acquisition integrations within
our unrealized synergies which are in turn recognized in earnings after an
acquisition has been fully integrated.  While the expected benefits on
earnings is estimated at the commencement of each transaction, due to the nature
of the matters 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.





Acquisition
of Rollpak Acquisition Corporation





On April
11, 2007, the Company completed its acquisition of 100% of the outstanding
common stock of Rollpak Acquisition Corporation, which is the sole stockholder
of Rollpak Corporation (“Rollpak”).  Rollpak is a flexible film
manufacturer located in Goshen, Indiana with annual net sales of approximately
$50.0 million in calendar 2006 sales.  The purchase price was funded
utilizing cash on hand.  The Rollpak acquisition has been accounted
for under the


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purchase
method of accounting, and accordingly, the purchase price has been allocated to
the identifiable assets and liabilities based on estimated fair values at the
acquisition date.





Acquisition
of MAC Closures, Inc.





On
December 19, 2007, the Company acquired 100% of the outstanding common stock of
MAC Closures, Inc. (“MAC”), a plastic cap and closure manufacturer located in
Waterloo, Quebec.  MAC is a fully integrated manufacturer of injection
molded plastic caps and closures primarily serving the pharmaceutical,
nutraceutical, personal care, amenity, and household and industrial chemical
industries with calendar year 2007 sales of $37.1 million.  MAC
manufactures stock and custom products for U.S. and Canadian based private and
national brand owners, distributors and other packaging
suppliers.  The MAC acquisition has been accounted for under the
purchase method of accounting, and accordingly, the purchase price has been
allocated to the identifiable assets and liabilities based on estimated fair
values at the acquisition date.  The purchase price was funded
utilizing cash on hand from the sale-leaseback transaction pursuant to which the
Company sold its manufacturing facilities located in Baltimore, Maryland;
Evansville, Indiana; and Lawrence, Kansas.  During June 2008 the
Company announced the shut down of its manufacturing facility in Oakville,
Ontario.  The affected business accounted for less than $7.0 million
of annual net sales and the business was transferred to other facilities within
the Rigid Closed Top segment.





Acquisition
of Captive Holdings, Inc.





On
February 5, 2008, the Company completed its acquisition of 100% of the
outstanding capital stock Captive Holdings, Inc., the parent company of Captive
Plastics, Inc. (“Captive”) for approx.  Captive is a manufacturer of
blow-molded bottles and injection-molded closures for the food, healthcare,
spirits and personal care end markets with annual net sales of approximately
$290.3 million in calendar 2007.  The purchase price was funded
utilizing the proceeds of a senior secured bridge loan facility which in turn
was repaid with the proceeds from the Senior Secured First Priority Notes
discussed in the Notes to the Consolidated or Combined Financial Statements
section of this Form 10-K.  The Captive acquisition has been accounted
for under the purchase method of accounting, and accordingly, the purchase price
has been allocated to the identifiable assets and liabilities based on estimated
fair values at the acquisition date.





Acquisition
of Assets of Erie County Plastics Corporation





In
November 2008, the Company was the successful bidder to acquire certain assets
of Erie County Plastics Corporation, a custom injection molder of plastics
packaging and components for $4.6 million.  Erie Plastics previously
filed for bankruptcy protection on September 29, 2008.  The Company
funded the acquisition of these assets with cash from
operations.  Synergies identified from the Erie acquisition were $4.0
million.





Sale
of Capsol Berry Plastics S.p.a.





In March
2009, the Company sold Capsol Berry Plastics S.p.a.  This business
generated annual net sales of approximately $17.0 million and was included in
our Rigid Closed Top segment.  The sale resulted in a net loss of $4.2
million, net of tax, which is included in Discontinued Operations.





Plant
Rationalizations




The
Company has included the expected impact of restructuring plans within our
unrealized synergies which are in turn recognized in earnings after the
restructuring plans are completed.  While the expected benefits on
earnings is estimated at the commencement of each plan, due to the nature of the
matters we are generally unable to accurately estimate or track what the
ultimate effects have been.  The Company intends to fund these
restructuring plans with cash from operations.





During
fiscal 2009, the Company announced its intention to shut down one manufacturing
facility within its Flexible Films division located in Bloomington, Minnesota
and one manufacturing facility within its Rigid Open Top division located in
Toluca, Mexico.  The Company recorded restructuring charges total
$11.3 million in fiscal 2009.  This charge included $7.8 million of
non-cash asset impairment costs.  The remaining liability has been
included within Accrued expenses and other current liabilities on the
Consolidated Balance Sheet.  The affected business accounted
for


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approximately
$65 million of fiscal 2008 annual net sales with the majority of the operations
transferred to other facilities.  Future costs associated with these
rationalizations are not expected to be material.





In
September of 2009, the Company announced the shut down of our Piscataway, New
Jersey facility.  The Company established opening balance sheet
reserves associated with the Captive Plastics acquisition of $2.4 million for a
facility shut down of which $1.5 million is expected to be paid in future
periods.





Discussion
of Results of Operations for Fiscal 2009 Compared to Fiscal 2008





Net Sales.  Net
sales decreased by 9% to $3,187.1 million for fiscal 2009 from $3,513.1 million
for fiscal 2008.  This $326.0 million decrease includes base volume
decline of 5% and net selling price decreases of 6% offset by acquisition volume
growth of 2%.  The following discussion in this section provides a
comparison of net sales by business segment.





Fiscal
      years ended2009
            
            
            2008
            
            
            $
      Change
            
            
            %
      ChangeNet
      sales:Rigid Open Top
            
            $
            1,062.9
            
            
            $
            1,053.2
            
            
            $
            9.7
            
            
            
            0.9
            %Rigid Closed
Top
            
            
            857.5
            
            
            
            853.4
            
            
            
            4.1
            
            
            
            0.5
            %Flexible Films
            
            
            838.8
            
            
            
            1,092.2
            
            
            
            (253.4
            )
            
            
            (23.2
            %)Tapes and
    Coatings
            
            
            427.9
            
            
            
            514.3
            
            
            
            (86.3
            )
            
            
            (16.8
            %)Total net sales
            
            $
            3,187.1
            
            
            $
            3,513.1
            
            
            $
            (326.0
            )
            
            
            (9.3
            %)





Net sales
in the Rigid Open Top business increased from $1,053.2 million in fiscal 2008 to
$1,062.9 million in fiscal 2009 as a result of base volume growth of 6% offset
by net selling price deceases of 5% primarily due to lower raw material
costs.  The base volume growth is primarily attributed to increased
sales in our container and thermoformed drink cup product line due to strong
sales to end customers in quick service restaurants, family dining restaurants,
and leading food and consumer product companies.  Net sales in the
Rigid Closed Top business increased from $853.4 million in fiscal 2008 to $857.5
million in fiscal 2009 as a result of acquisition volume growth attributed to
Captive, MAC and Erie Plastics of 11% partially offset by a base volume decline
of 3% and net selling price decreases of 8%.  The base volume decline
is primarily attributed to decreased sales in our aerosol overcaps and tubes
product lines primarily as a result of contracting end use
markets.  Net sales in the Flexible Films business decreased from
$1,092.2 million in fiscal 2008 to $838.8 million in fiscal 2009 as a result of
base volume decline of 12% and net selling price decreases of 11% primarily due
to lower raw material costs.  The base volume decline is primarily
attributed to the slowness in the housing sector.  Net sales in the
Tapes and Coatings business decreased from $514.3 million in fiscal 2008 to
$427.9 million in fiscal 2009 primarily as a result of base volume decline of
17%.  The base volume decline is primarily attributed to softness in
the new home construction, corrosion protection and automotive
markets.





Gross
Profit.  Gross profit increased by $52.2 million to $546.0
million (17% of net sales) for fiscal 2009 from $493.8 million (14% of net
sales) for fiscal 2008.  This increase is primarily attributed to a
timing lag of passing through raw material costs to our customers in our Rigid
Open Top and Rigid Closed Top segments, realization of synergies and cost
reduction efforts partially offset by lower volumes.





Operating
Expenses.  Selling, general and administrative expenses
decreased by $14.8 million to $325.2 million for fiscal 2009 from $340.0 million
for fiscal 2008 primarily as a result of cost reduction efforts and realization
of synergies partially offset by increased accrued bonus
expense.  Restructuring and impairment charges increased to $11.3
million in fiscal 2009 compared to $9.6 million in fiscal 2008 as a result
of $7.8 million of non-cash fixed asset impairment charges associated with
the plant consolidations within the Flexible Films and Rigid Open Top
segments.  Other expenses decreased from $32.8 million in fiscal 2008
to $23.7 million for fiscal 2009 primarily as a result of a decrease in business
optimization expenses.


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Operating
Income.  Operating income increased $74.4 million from $111.4
million in fiscal 2008 to $185.8 million in fiscal 2009.  The
following discussion in this section provides a comparison of operating income
by business segment.





Fiscal
      years ended2009
            
            
            2008
            
            
            $
      Change
            
            
            %
      ChangeOperating
      income (loss):Rigid Open Top
            
            $
            117.8
            
            
            $
            73.7
            
            
            $
            44.1
            
            
            
            59.8
            %Rigid Closed
Top
            
            
            59.2
            
            
            
            42.0
            
            
            
            17.2
            
            
            
            41.0
            %Flexible Films
            
            
            5.8
            
            
            
            (10.3
            )
            
            
            16.1
            
            
            
            156.3
            %Tapes and
    Coatings
            
            
            3.0
            
            
            
            6.0
            
            
            
            (3.0
            )
            
            
            (50.0
            %)Total operating
      income
            
            $
            185.8
            
            
            $
            111.4
            
            
            $
            74.4
            
            
            
            66.8
            %





Operating
income for the Rigid Open Top business increased from $73.7 million for fiscal
2008 to $117.8 million in fiscal 2009.  The increase of $44.1 million
is attributable to base volume growth and a timing lag of passing through a
reduction in raw material costs to our customers.  Operating income
for the Rigid Closed Top business increased from $42.0 million for fiscal 2008
to $59.2 million in fiscal 2009.  The increase of $17.2 million is
primarily attributable to the acquisition of Captive
Plastics.  Operating income for the Flexible Film business increased
from an operating loss of $10.3 million for fiscal 2008 to operating income of
$5.8 million in fiscal 2009.  The increase of $16.1 million is
primarily attributable to improved operating performance and various cost
reduction efforts.  Operating income for the Tapes and Coatings
business decreased from an operating income of $6.0 million for fiscal 2008 to
$3.0 million in fiscal 2009.  The decrease of $3.0 million is
primarily attributable to base volume decline.





Other Income.Other income
recorded in fiscal 2009 is attributed to a $25.1 million gain related to the
repurchase of the 10 1⁄4% Senior Subordinated Notes and a $5.7 million gain
attributed to the fair value adjustment for our interest rate
swaps.





Interest
Expense.Interest expense decreased $0.5 million to $262.8
million for fiscal 2009 from $262.3 million in fiscal 2008.





Interest
Income.Interest income increased from $1.8 million in fiscal
2008 to $18.3 million in fiscal 2009 primarily as a result of $17.6 million of
interest and accretion income from our investments in Berry Group’s senior
unsecured term loan.





Income Tax
Benefit.For fiscal 2009, we recorded an income tax benefit of
$6.3 million or an effective tax rate of 22%, which is a change of $42.9 million
from the income tax benefit of $49.2 million or an effective tax rate of 33% in
fiscal 2008.  The effective tax rate is less than the statutory rate
primarily attributed to the smaller net loss and relative impact to permanent
items and establishment of valuation allowance for certain foreign operating
losses where the benefits are not expected to be realized.





Net Loss.  Net loss
was $26.2 million for fiscal 2009 compared to a net loss of $101.1 million for
fiscal 2008 for the reasons discussed above.





Discussion
of Results of Operations for Fiscal 2008 Compared to Fiscal 2007





Net Sales.  Net
sales increased 15% to $3,513.1 million for the fiscal 2008 from $3,055.0
million for the fiscal 2007.  This $458.1 million increase includes
acquisition volume growth of 8%.  The following discussion in this
section provides a comparison of net sales by business segment.




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Fiscal
      years ended2008
            
            
            2007
            
            
            $
      Change
            
            
            %
      ChangeNet
      sales:Rigid Open Top
            
            $
            1,053.2
            
            
            $
            881.3
            
            
            $
            171.9
            
            
            
            19.5
            %Rigid Closed
Top
            
            
            853.4
            
            
            
            598.0
            
            
            
            255.4
            
            
            
            42.7
            %Flexible Films
            
            
            1,092.2
            
            
            
            1,042.8
            
            
            
            49.4
            
            
            
            4.7
            %Tapes and
    Coatings
            
            
            514.3
            
            
            
            532.9
            
            
            
            (18.6
            )
            
            
            (3.5
            %)Total net sales
            
            $
            3,513.1
            
            
            $
            3,055.0
            
            
            $
            458.1
            
            
            
            15.0
            %








Net sales
in the Rigid Open Top business increased from $881.3 million in fiscal 2007 to
$1,053.2 million in fiscal 2008.  Base volume growth in the Rigid Open
Top business, excluding net selling price increases, was 6% driven primarily by
growth in our various container product lines and thermoformed drink
cups.  Net sales in the Rigid Closed Top business increased from
$598.0 million in fiscal 2007 to $853.4 million in fiscal 2008 primarily as a
result of acquisition volume growth attributed to Captive and MAC totaling
$215.3 million for fiscal 2008.  The Flexible Films business net sales
increased from $1,042.8 million in fiscal 2007 to $1,092.2 million in fiscal
2008.  Base volume declined, excluding net selling price increases, by
3% primarily due to the Company’s decision to discontinue historically lower
margin business and slowness in the housing sector.  Net sales in the
Tapes and Coatings business decreased from $536.7 million in fiscal 2007 to
$514.3 million in fiscal 2008 primarily driven by softness in the new home
construction and automotive markets partially offset by strong volume growth in
the corrosion protection business.





Gross
Profit.  Gross profit increased by $22.2 million to $493.8
million (14% of net sales) for fiscal 2008 from $471.6 million (15% of net
sales) for fiscal 2007.  This increase is attributed to the
productivity improvements in the Flexible Films and Tapes and Coatings segments
as a result of realizing synergies and increased selling prices partially offset
by the timing lag of passing through increased raw material costs to
customers.





Selling, General and Administrative
Expenses.Selling, general and administrative expense
increased by $18.5 million to $340.0 million for fiscal 2008 from $321.5 million
for fiscal 2007 primarily as a result of a $15.1 million increase in
amortization of intangible assets related to the Captive and Mac
acquisitions.





Restructuring
Charges.Restructuring and impairment charges were $9.6
million in fiscal 2008 compared to $39.1 million in fiscal 2007.  The
costs are associated with the shut down of several facilities in the Flexible
Films, Rigid Closed Top and Tapes and Coatings segments.  The
restructuring and impairment charges for fiscal 2008 consisted of $0.3 million
for severance and termination benefits, $7.9 million of facility exit costs, and
$1.4 million of other costs as a result of plant rationalizations discussed
above.





Other Operating
Expenses.  Other expenses decreased from $43.6 million in
fiscal 2007 to $32.8 million for fiscal 2008 primarily as a result of a decrease
in transaction and integration costs associated with the Merger with
Covalence.





Other Expense.  The
Company incurred a $37.3 million loss on extinguished debt in fiscal 2007
primarily as a result of the write-off of deferred financing fees from
Covalence’s and Old Berry’s senior credit facilities and Covalence’s second
priority floating rate notes that were extinguished in connection with the
merger with Covalence Specialty Material Holding Corp.





Interest Expense,
Net.  Net interest expense increased $24.1 million to $261.7
million for fiscal 2008 from $237.6 million in fiscal 2007 primarily as a result
of increased borrowings to finance the Captive acquisition, partially offset by
a decline in borrowing costs of our variable rate debt instruments.





Income Tax
Benefit.For fiscal 2008, we recorded an income tax benefit of
$49.2 million or an effective tax rate of 33%, which is a change of $39.4
million from the income tax benefit of $88.6 million or an effective tax rate of
43% in fiscal 2007.  This decrease in the income tax benefit primarily
relates to a decrease in the loss before income taxes in fiscal 2008 versus
fiscal 2007 and because the effective rate differed from the statutory rate as
the Company concluded it was more likely than not that certain foreign operating
losses would not be realized.


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Net Loss.  Net loss
was $101.1 million for fiscal 2008 compared to a net loss of $116.2 million for
fiscal 2007 for the reasons discussed above.





Income
Tax Matters





At fiscal
year end 2009, the Company has unused operating loss carryforwards of $485.3
million for federal which begin to expire in 2021 and $42.0 million of
foreign operating loss carryforwards.  Alternative minimum tax credit
carryforwards of approximately $7.4 million are available to the Company
indefinitely to reduce future years’ federal income taxes.  The net
operating losses are subject to an annual limitation under guidance from the
Internal Revenue Code, however the annual limitation is in excess of the net
operating loss, effectively no limitation exists.  As part of the
effective tax rate calculation, if we determine that a deferred tax asset
arising from temporary differences is not likely to be utilized, we will
establish a valuation allowance against that asset to record it at its expected
realizable value.  The Company has not provided a valuation allowance
on its net operating loss carryforwards in the United Statues because it has
determined that future rewards of its temporary taxable differences will occur
in the same periods and are of the same nature as the temporary differences
giving rise to the deferred tax assets.  Our valuation allowance
against deferred tax assets was $8.2 million and $5.0 million at the end of
fiscal 2009 and 2008, respectively, related to the foreign operating loss
carryforwards for Ociesse s.r.l. and Berry Plastics de Mexico.





Liquidity
and Capital Resources





Senior
Secured Credit Facility


The
Company’s senior secured credit facilities consist of $1,200.0 million term loan
and $381.7 million asset based revolving line of credit (“Credit Facility”), net
of defaulting lenders.  The availability under the revolving line of
credit is the lesser of $400.0 million or based on a defined borrowing base
which is calculated based on available accounts receivable and
inventory.  The term loan matures on April 3, 2015 and the revolving
line of credit matures on April 3, 2013.  The LIBOR rate on the term
loan and the line of credit was 0.28% and 0.52%, respectively, at the end of
fiscal 2009, determined by reference to the costs of funds for eurodollar
deposits in dollars in the LIBOR for the interest period relevant to such
borrowing plus the applicable margin.  The applicable margin for LIBOR
rate borrowings under the revolving credit facility ranges from 1.00% to 1.75%
and for the term loan is 2.00%.  The line of credit is also subject to
an unused commitment fee for unused borrowings ranging from 0.25% to 0.35% per
annum and a letter of credit fee of 0.125% per annum for each letter of credit
that is issued.  The revolving line of credit allows up to $100.0
million of letters of credit to be issued instead of borrowings under the
revolving line of credit.  At the end of fiscal 2009, the Company had
$10.0 million of cash and $69.0 million outstanding on the revolving credit
facility providing unused borrowing capacity of $279.0 million under the
revolving line of credit subject to the solvency of our lenders to fund their
obligations and our borrowing base calculations.  The Company was in
compliance with all covenants at the end of fiscal 2009.





Our fixed
charge coverage ratio, as defined in the revolving credit facility, is
calculated based on a numerator consisting of adjusted EBITDA less pro forma
adjustments, income taxes paid in cash and capital expenditures, and a
denominator consisting of scheduled principal payments in respect of
indebtedness for borrowed money, interest expense and certain
distributions.  We are obligated to sustain a minimum fixed charge
coverage ratio of 1.0 to 1.0 under the revolving credit facility at any time
when the aggregate unused capacity under the revolving credit facility is less
than 10% of the lesser of the revolving credit facility commitments and the
borrowing base (and for 10 business days following the date upon which
availability exceeds such threshold) or during the continuation of an event of
default.  At the of fiscal 2009, the Company had unused borrowing
capacity of $279.0 million under the revolving credit facility subject to a
borrowing base and thus was not subject to the minimum fixed charge coverage
ratio covenant.  Our fixed charge ratio was 1.0 to 1.0 at the end of
fiscal 2009.





Despite
not having financial maintenance covenants, our debt agreements contain certain
negative covenants.  The failure to comply with these negative
covenants could restrict our ability to incur additional indebtedness, effect
acquisitions, enter into certain significant business combinations, make
distributions or redeem indebtedness.  The term loan facility contains
a negative covenant first lien secured leverage ratio covenant of 4.0 to 1.0 on
a pro forma basis for a proposed transaction, such as an acquisition or
incurrence of additional first lien debt.  Our first lien secured
leverage ratio was 3.7 to 1.0 at the end of fiscal 2009.


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A key
financial metric utilized in the calculation of the first lien leverage ratio is
adjusted EBITDA as defined in the Company’s senior secured credit
facilities.  The following table reconciles our adjusted EBITDA of
$518.9 million for fiscal 2009 to net loss.





Fiscal
      2009Adjusted EBITDA
            
            $
            518.9Net interest
      expense
            
            
            (244.5
            )Depreciation and
      amortization
            
            
            (253.5
            )Income tax
    benefit
            
            
            6.3Business optimization
      expense
            
            
            (19.3
            )Restructuring and impairment
      (a)
            
            
            (11.3
            )Stock based
      compensation
            
            
            (12.4
            )Management fees
            
            
            (6.4
            )Other non-cash
      income
            
            
            25.1Pro forma cost
      reductions
            
            
            (16.2
            )Pro forma synergies
      (b)
            
            
            (12.9
            )Net loss
            
            $
            (26.2
            )





Cash flow from operating
      activities
            
            $
            414.4Cash flow from investing
      activities
            
            $
            (364.2
            )Cash flow from financing
      activities
            
            $
            (229.7
            )


(a)
            Includes
      $7.8 of non-cash asset impairments.


(b)
            Represents
      synergies related to the following: Covalence ($3.5 million), Captive
      ($6.4 million), MAC ($0.2 million) and Erie ($2.8
  million).


For
comparison purposes, the following table reconciles our adjusted EBITDA for the
thirteen weeks ended September 26, 2009 and September 27, 2008.





Thirteen
      weeks endedSeptember
      26, 2009
            
            
            September
      27, 2008Adjusted EBITDA
            
            $
            132.3
            
            
            $
            132.2Net interest
      expense
            
            
            (48.3
            )
            
            
            (68.8
            )Depreciation and
      amortization
            
            
            (64.8
            )
            
            
            (68.9
            )Income tax (expense)
      benefit
            
            
            (5.1
            )
            
            
            6.4Business optimization
      expense
            
            
            (4.6
            )
            
            
            (8.8
            )Restructuring and
      impairment
            
            
            (2.5
            )
            
            
            (1.0
            )Stock based
      compensation
            
            
            (0.3
            )
            
            
            (4.3
            )Management fees
            
            
            (1.8
            )
            
            
            (1.5
            )Other non-cash income
      (expense)
            
            
            7.6
            
            
            
            (2.3
            )Pro forma cost
      reductions
            
            
            (1.5
            )
            
            
            (6.0
            )Pro forma
    synergies
            
            
            (1.7
            )
            
            
            (6.3
            )Net loss
            
            $
            9.3
            
            
            $
            (29.3
            )





Cash flow from operating
      activities
            
            $
            74.6
            
            
            $
            (35.5
            )Cash flow from investing
      activities
            
            $
            (85.3
            )
            
            $
            (35.6
            )Cash flow from financing
      activities
            
            $
            (7.5
            )
            
            $
            241.5





While the
determination of appropriate adjustments in the calculation of adjusted EBITDA
is subject to interpretation under the terms of the Credit Facility, management
believes the adjustments described above are in accordance with the covenants in
the Credit Facility.  Adjusted EBITDA should not be considered in
isolation or construed as an alternative to our net income (loss) or other
measures as determined in accordance with GAAP.  In addition, other
companies in our industry or across different industries may calculate bank
covenants and related definitions differently than we do, limiting the
usefulness of our calculation of adjusted EBITDA as a comparative
measure.





10
1⁄4% Senior Subordinated Notes


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The
Company’s $265.0 million in aggregate principal amount of 10 1⁄4% senior
subordinated notes (“10 1⁄4% Senior Subordinated Notes”) mature on March 1,
2016.  The notes are senior subordinated obligations of the Company
and rank junior to all other senior indebtedness that does not contain similar
subordination provisions.  No principal payments are required with
respect to the 10 1⁄4% Senior Subordinated Notes prior to
maturity.  Interest on the 10 1⁄4% Senior Subordinated Notes is due
semi-annually on March 1 and September 1.  The Company was in
compliance with all covenants at the end of fiscal 2009.





In fiscal
2009, BP Parallel LLC, a non-guarantor subsidiary of the Company, purchased
$49.7 million of 10 1⁄4% Senior Subordinated Notes for $24.5 million in cash, plus
accrued interest.  The repurchase resulted in a net gain of $25.1
million, which is in Other income in our Consolidated Statements of
Operations.  The Company funded the purchases with cash on
hand.





Berry
Group Indebtedness


On June
5, 2007, Berry Group entered into a $500.0 million senior unsecured term loan
agreement (“Senior Unsecured Term Loan”) with a syndicate of
lenders.  The Senior Unsecured Term Loan matures on June 5, 2014 and
was sold at a 1% discount, which is being amortized over the life of the
loan.  Interest on the agreement is payable on a quarterly basis and
bears interest at the Company’s option based on (1) a fluctuating rate per annum
equal to the higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the
rate of interest in effect for such day as publicly announced from time to time
by Credit Suisse as its “prime rate” plus 525 basis points or (2) LIBOR (0.28%
at the end of fiscal 2009) plus 625 basis points.  The Senior
Unsecured Term Loan contains a payment in kind (“PIK”) option which allows Berry
Group to forgo paying cash interest and to add the PIK interest to the
outstanding balance of the loan.  This option expires on the five year
anniversary of the loan and if elected increases the rate per annum by 75 basis
points for the specific interest period.  Berry Group at its election
may make the quarterly interest payments in cash, may make the payments by
paying 50% of the interest in cash and 50% in PIK interest or 100% in PIK
interest for the first five years.  The Senior Unsecured Term Loan is
unsecured and there are no guarantees by Berry Plastics Corporation or any of
its subsidiaries and therefore this financial obligation is not recorded in the
Consolidated Financial Statements of Berry Plastics
Corporation.  Berry Group elected to exercise the PIK interest option
during fiscal 2008 and 2009.





Berry
Group at its election may call the notes up to the first anniversary date for
100% of the principal balance plus accrued and unpaid interest and an applicable
premium.  Berry Group’s call option for the notes between the one year
and two year and two year and three year anniversary dates changes to 102% and
101% of the outstanding principal balance plus accrued and unpaid interest,
respectively.  The notes also contain a put option which allows the
lender to require Berry Group to repay any principal and applicable PIK interest
that has accrued if Berry Group has an applicable high yield discount obligation
(“AHYDO”) within the definition outlined in the Internal Revenue Code, section
163(i)(1) at each payment period subsequent to the five year anniversary
date.





In fiscal
2009, BP Parallel LLC invested $165.9 million to purchase assignments of $514.5
million principal of the Senior Unsecured Term Loan.  We have the
intent and ability to hold the security to maturity.  The investment
is stated at amortized cost and the discount is being accreted under the
effective interest method to interest income until the maturity of the debt on
June 5, 2014.  We have recorded the investment in Other assets in the
Consolidated Balance Sheet and are recording the interest income and the income
from the discount on the purchase of Senior Unsecured Term Loan in Interest
income in the Consolidated Statements of Operations.  The Company has
recognized $17.6 million of interest and accretion income in fiscal
2009.  The remaining balance outstanding at the end of fiscal 2009 of
Senior Unsecured Term Loan is $79.7 million.


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Contractual
Obligations and Off Balance Sheet Transactions





Our
contractual cash obligations at the end of fiscal 2009 are summarized in the
following table.





Payments
      due by period as of the end of fiscal 2009Total
            
            
            < 1 year
            
            
            1-3 years
            
            
            4-5 years
            
            
            > 5 yearsLong-term
      debt, excluding capital leases
            
            $
            3,346.2
            
            
            $
            12.0
            
            
            $
            24.0
            
            
            $
            843.0
            
            
            $
            2,467.2Capital
      leases (a)
            
            
            37.0
            
            
            
            7.3
            
            
            
            11.9
            
            
            
            11.0
            
            
            
            6.8Fixed
      interest rate payments (b)
            
            
            741.3
            
            
            
            139.4
            
            
            
            237.3
            
            
            
            235.4
            
            
            
            129.2Variable
      interest rate payments (c)
            
            
            367.8
            
            
            
            64.0
            
            
            
            140.8
            
            
            
            138.7
            
            
            
            24.3Operating
      leases
            
            
            381.3
            
            
            
            47.0
            
            
            
            80.0
            
            
            
            48.3
            
            
            
            112.4Funding
      of pension & other postretirement obligations (d)
            
            
            3.0
            
            
            
            3.0
            
            
            
            —
            
            
            
            —
            
            
            
            —Total
      contractual cash obligations
            
            $
            4,783.0
            
            
            $
            272.7
            
            
            $
            494.0
            
            
            $
            1,276.4
            
            
            $
            2,739.9





(a)
            Includes
      anticipated interest of $8.4 million over the life of the capital
      leases.


(b)
            Includes
      variable rate debt subject to interest rate swap
    agreements.


(c)
            Based
      on applicable interest rates in effect end of fiscal
  2009.


(d)
            Pension
      and other postretirement contributions have been included in the above
      table for the next year.  The amount is the estimated
      contributions to our funded defined benefit plans.  The
      assumptions used by the actuary in calculating the projection includes
      weighted average return on pension assets of approximately 8% for
      2010.  The estimation may vary based on the actual return on our
      plan assets.  See Note 9 to the Consolidated or Combined
      Financial Statements of this Annual Report 10-K for more information on
      these obligations.





Cash
Flows from Operating Activities





Net cash
provided by operating activities was $414.4 million for fiscal 2009 compared to
$9.8 million of cash flows provided by operating activities for fiscal
2008.  This increase of $404.6 million is primarily the result of a
$322.8 million change in working capital primarily due to declining resin costs
and improved operating performance primarily driven by realization of synergies
and the effect of the cost reduction efforts.





Net cash
provided by operating activities was $9.8 million for fiscal 2008 compared to
$137.3 million of cash flows provided by operating activities for fiscal
2007.  The change in cash flow from operating activities is the result
of a change in working capital primarily due to increased resin costs and timing
lag of passing through raw material costs to our customers in our Rigid Open Top
and Rigid Closed Top segments contributing to increases in receivables,
inventory and payables.





Cash
Flows from Investing Activities





Net cash
used for investing activities was $364.2 million for fiscal 2009 compared to net
cash used of $655.6 million for fiscal 2008.  This change of $291.4
million is primarily a result of the acquisition of Captive in fiscal 2008
partially offset by increased capital spending and the investment in Berry
Group’s Senior Unsecured Term Loan in fiscal 2009.





Net cash
used for investing activities was $655.6 million for fiscal 2008 compared to
$164.3 million for fiscal 2007 primarily as a result of the acquisition of
Captive and MAC.  In addition, our investments in capital expenditures
for fiscal 2008 totaled $162.4 million partially offset by $83.0 million from
disposition of assets, including proceeds from sale-leaseback
transactions.





Our
investments in capital expenditures for fiscal 2007 totaled $99.3 million
partially offset by $10.8 million of cash received from disposition of assets
which was primarily the sale of Berry Plastics UK Ltd. in April
2007.  In addition, we used $75.8 million primarily for (1) the
acquisition of Rollpak Corporation and (2) a $30.0 million payment to Tyco as
finalization of the working capital settlement.


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Cash
Flows from Financing Activities





Net cash
used for financing activities was $229.7 million for fiscal 2009 compared to net
cash provided by financing activities of $821.0 million for fiscal
2008.  This change of $1,050.7 million is primarily attributed to the
reduction of revolving line of credit in fiscal 2009 and the borrowing in fiscal
2008 to fund the Captive acquisition.





Net cash
provided by financing activities was $821.0 million for fiscal 2008 compared to
$40.4 million used for financing activities.  In February 2008, we
used the proceeds from the senior secured bridge facility to fund the $520.0
million acquisition of Captive Plastics.  This senior secured bridge
facility was subsequently retired in April 2008, in connection with the issuance
of our First Priority Floating Rate Notes which resulted in us receiving
approximately $661.4 million of cash proceeds.  The excess proceeds
from our April offering were used to pay down our outstanding borrowings on our
revolving line of credit.  We subsequently borrowed $257.1 million
under our revolving credit facilities to fund working capital and to ensure that
we had liquidity to finance our operations given the turmoil in the financial
markets.  We had approximately $189.7 million in cash at the end of
fiscal 2008.  We paid approximately $26.4 million in financing fees
related to the First Priority Floating Rate Notes.





Net cash
used for financing activities was $40.4 million for fiscal 2007.  In
the period, we generated cash of $1,233.0 million from long-term borrowing in
connection with the Merger with Covalence and paid $9.7 million of debt
financing costs associated with closing these borrowings.  We paid
$1,161.2 million of long-term borrowings primarily as a result of the Merger
with Covalence and had net equity distributions of $102.5 million primarily a
result of the dividend to Berry Group in June 2007 described above.





Based on
our current level of operations, we believe that cash flow from operations and
available cash, together with available borrowings under our senior secured
credit facilities, will be adequate to meet our short-term liquidity needs over
the next twelve months.  We base such belief on historical experience
and the funds available under the senior secured credit
facility.  However, we cannot predict our future results of operations
and our ability to meet our obligations involves numerous risks and
uncertainties, including, but not limited to, those described in the “Risk
Factors” section in this Form 10-K.  In particular, increases in the
cost of resin which we are unable to pass through to our customers on a timely
basis or significant acquisitions could severely impact our
liquidity.  At the end of fiscal 2009, our cash balance was $10.0
million, and we had unused borrowing capacity of $279.0 million under our
revolving line of credit, net of defaulting lenders.





Accounts
Receivable and Inventory





2009
            
            
            2008Net
      Sales (last 12 months)
            
            $
            3,187.1
            
            
            $
            3,513.1Average
      Accounts Receivable
            
            
            377.9
            
            
            
            397.5AR
      Turnover Rate  (a)
            
            
            8.4
            
            
            
            8.8Cost
      of Goods Sold (last 12 months)
            
            $
            2,641.0
            
            
            $
            3,019.3Average
      Inventory
            
            
            437.2
            
            
            
            442.8Inventory
      Turnover Rate  (b)
            
            
            6.0
            
            
            
            6.8





(a)
Accounts Receivable Turnover Rate = Revenue for the last twelve months divided
by average accounts receivable.


(b)
Inventory Turnover Rate = Cost of goods sold for the last twelve months divided
by average ending inventory.


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Critical
Accounting Policies and Estimates





We
disclose those accounting policies that we consider to be significant in
determining the amounts to be utilized for communicating our consolidated
financial position, results of operations and cash flows in the second note to
our consolidated financial statements included elsewhere herein.  Our
discussion and analysis of our financial condition and results of operations are
based on our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United
States.  The preparation of financial statements in conformity with
these principles requires management to make estimates and assumptions that
affect amounts reported in the financial statements and accompanying
notes.  Actual results are likely to differ from these estimates, but
management does not believe such differences will materially affect our
financial position or results of operations.  We believe that the
following accounting policies are the most critical because they have the
greatest impact on the presentation of our financial condition and results of
operations.





Allowance for Doubtful
Accounts.We evaluate our allowance for doubtful accounts on a
quarterly basis and review any significant customers with delinquent balances to
determine future collectibility.  We base our determinations on legal
issues (such as bankruptcy status), past history, current financial and credit
agency reports, and the experience of our credit representatives.  We
reserve accounts that we deem to be uncollectible in the quarter in which we
make the determination. We maintain additional reserves based on our historical
bad debt experience.  Additionally, our allowance for doubtful
accounts includes a reserve for cash discounts that are offered to some of our
customers for prompt payment.  We believe, based on past history and
our credit policies, our net accounts receivables are of good
quality.  A ten percent increase or decrease in our bad debt
experience would not have a material impact on the results of operations of the
Company.  The decline in our allowance for doubtful accounts was
driven by lower selling prices and improved collections.  Our
allowance for doubtful accounts was $9.0 million and $12.1 million as of fiscal
year end 2009 and 2008, respectively.





Inventory
Obsolescence.  We evaluate our reserve for inventory
obsolescence on a quarterly basis and review inventory on-hand to determine
future salability.  We base our determinations on the age of the
inventory and the experience of our personnel.  We reserve inventory
that we deem to be not salable in the quarter in which we make the
determination.  We believe, based on past history and our policies and
procedures, that our net inventory is salable.  A ten percent increase
or decrease in our inventory obsolescence experience would not have a material
impact on the results of operations of the Company.  Our reserve for
inventory obsolescence was $13.1 million and $19.3 million as of fiscal year end
2009 and 2008, respectively.  The decline in the reserve relates to
lower costs of resin and lower carrying values of inventory and improved
inventory management.





Medical
Insurance.We offer our employees medical insurance that is
primarily self-insured by us.  As a result, we accrue a liability for
known claims as well as the estimated amount of expected claims incurred but not
reported.  We evaluate our medical claims liability on a quarterly
basis, obtain an independent actuarial analysis on an annual basis and perform
payment lag analysis.  Based on our analysis, we believe that our
recorded medical claims liability should be sufficient.  A ten percent
increase or decrease in our medical claims experience would not have a material
impact on the results of operations of the Company.  Our accrued
liability for medical claims was $7.5 million and $3.8 million, including
reserves for expected medical claims incurred but not reported, as of fiscal
year end 2009 and 2008, respectively.





Workers’ Compensation
Insurance.The majority of our facilities are covered under a
large deductible program for workers’ compensation insurance.  On a
quarterly basis, we evaluate our liability based on third-party adjusters’
independent analyses by claim.  Based on our analysis, we believe that
our recorded workers’ compensation liability should be sufficient.  A
ten percent increase or decrease in our workers’ compensations claims experience
would not have a material impact on the results of operations of the
Company.  Our accrued liability for workers’ compensation claims was
$9.3 million and $7.6 million as of fiscal year end 2009 and 2008,
respectively.





Revenue
Recognition.  Revenue from the sales of products is recognized
at the time title and risks and rewards of ownership pass to the customer
(either when the products reach the free-on-board shipping point or destination
depending on the contractual terms), there is persuasive evidence of an
arrangement, the sales price is fixed and determinable and collection is
reasonably assured.


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Impairments of Long-Lived
Assets.  In accordance with the guidance of the FASBfor the
impairment or disposal of long lived assets we review long-lived assets for
impairment whenever events or changes in circumstances indicate the carrying
amount of such assets may not be recoverable.  Impairment losses are
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets’ carrying amounts.  The impairment
loss is measured by comparing the fair value of the asset to its carrying
amount.




Goodwill and Other Indefinite Lived
Intangible Assets.  We are required to perform a review for
impairment of goodwill and other indefinite lived intangibles to evaluate
whether events and circumstances have occurred that may indicate a potential
impairment. Goodwill is considered to be impaired if we determine that the
carrying value of the reporting unit exceeds its fair value. Other indefinite
lived intangibles are considered to be impaired if the carrying value excess the
fair value.  In addition to the annual review, an interim review is
required if an event occurs or circumstances change that would more likely than
not reduce the fair value of a reporting unit below its carrying amount.
Examples of such events or circumstances could include, but are not limited to:
a significant decline in our earnings, a significant decline in the total value
of our Company, unanticipated competition or a loss of key
personnel.





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


Carrying
      Value as of
            
            
            Goodwill
      as ofJuly
      1, 2009
            
            
            2009
            
            
            2008Rigid Open Top
            
            $
            1,572.6
            
            
            $
            646.3
            
            
            $
            646.3Rigid Closed
Top
            
            
            1,364.1
            
            
            
            768.1
            
            
            
            773.9Flexible Films
            
            
            427.1
            
            
            
            16.8
            
            
            
            23.3




In
accordance with our policy, we completed our most recent annual evaluation for
impairment of goodwill as of the first day of the fourth fiscal quarter and
determined that no impairment existed. Our evaluation method included
management estimates of cash flow projections based on an internal strategic
review and comparable EBITDA multiples of our market peer companies to derive
our fair values.  A decline of greater than 10% in the fair value
of our Rigid Open Top and Rigid Closed Top segments could result in a potential
impairment of goodwill or trademarks depending on revenue or earnings growth,
the cost of capital and other factors we utilize to determine our segment and
trademark fair values.  Our Flexible Films Segment would need to
decline more than 20% to result in a potential impairment.  For
purposes of this test, we held our EBITDA as a percentage of revenue consistent
with our margins as of the testing date.  Growth by reporting unit
varies from year-to-year between segments.  For purposes of this test,
the Rigid Open Top forecasted overall growth ranges between 4.0% and
5.0%  in the following five years and 3.0% in the terminal
year.  The Rigid Closed Top forecasted overall growth ranges between
3.0% and 4.3%  in the following five years and 3.0% in the terminal
year.  We assumed that the Company would maintain capital
spending of approximately $175 million to continue to increase efficiencies in
production and have assumed that these efficiencies would be offset by other
rising costs in selling, general and administrative expenses.  Given
the uncertainty in economic trends, there can be no assurance that when we
complete our future annual or other periodic reviews for impairment of goodwill
that a material impairment charge will not be recorded. Goodwill and indefinite
lived trademarks totaled $1.4 billion and $220.2 million at the end of the
fiscal 2009, respectively, with substantially all of our Goodwill relating to
our Rigid Open Top and Closed Top segments.  No impairments were
recorded in the financial statements included in this Form 10-K.




Deferred Taxes and Effective Tax
Rates.We estimate the effective tax rates (“ETR”) and
associated liabilities or assets for each legal entity of ours in accordance
with authoritative guidance.  We use tax-planning to minimize or defer
tax liabilities to future periods. In recording ETR’s and related liabilities
and assets, we rely upon estimates, which are based upon our interpretation of
United States and local tax laws as they apply to our legal entities and our
overall tax structure.  Audits by local tax jurisdictions, including
the United States Government, could yield different interpretations from our own
and cause the Company to owe more taxes than originally recorded.  For
interim periods, we accrue our tax provision at the ETR that we expect for the
full year.  As the actual results from our various businesses vary
from our estimates earlier in the year, we adjust the succeeding interim
periods’ ETR’s to reflect our best estimate for the year-to-date results and for
the full year.  As part of the ETR, if we determine that a deferred
tax asset arising from temporary differences is not likely to be utilized, we
will establish a valuation allowance against that asset to record it at its
expected realizable value.  The Company believes that it will not
generate sufficient future taxable income to realize the tax benefits in foreign
jurisdictions related to the deferred tax assets of Ociesse s.r.l. and Berry
Plastics de Mexico.  Therefore, the Company has provided a full
valuation allowance against its foreign net operating losses included
within


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the
deferred tax assets for Ociesse s.r.l. and Berry Plastics de
Mexico.  The Company has not provided a valuation allowance on its net
operating losses in the United States because it has determined that future
reversals of its temporary taxable differences will occur in the same periods
and are of the same nature as the temporary differences giving rise to the
deferred tax assets..  Our valuation allowance against deferred tax
assets was $8.2 million and $5.0 million as of fiscal year end 2009 and 2008,
respectively.







Accrued
Rebates.We offer various rebates to our customers in exchange
for their purchases.  These rebate programs are individually
negotiated with our customers and contain a variety of different terms and
conditions.  Certain rebates are calculated as flat percentages of
purchases, while others included tiered volume incentives.  These
rebates may be payable monthly, quarterly, or annually.  The
calculation of the accrued rebate balance involves significant management
estimates, especially where the terms of the rebate involve tiered volume levels
that require estimates of expected annual sales.  These provisions are
based on estimates derived from current program requirements and historical
experience.  We use all available information when calculating these
reserves.  Our accrual for customer rebates was $43.9 million and
$51.5 million as of fiscal year end 2009 and 2008, respectively.





Pension.  Pension
benefit costs include assumptions for the discount rate, retirement age, and
expected return on plan assets.  Retiree medical plan costs include
assumptions for the discount rate, retirement age, and health-care-cost trend
rates.  These assumptions have a significant effect on the amounts
reported.  In addition to the analysis below, see the notes to the
consolidated financial statements for additional information regarding our
retirement benefits.  Periodically, we evaluate the discount rate and
the expected return on plan assets in our defined benefit pension and retiree
health benefit plans.  In evaluating these assumptions, we consider
many factors, including an evaluation of the discount rates, expected return on
plan assets and the health-care-cost trend rates of other companies; our
historical assumptions compared with actual results; an analysis of current
market conditions and asset allocations; and the views of
advisers.  In evaluating our expected retirement age assumption, we
consider the retirement ages of our past employees eligible for pension and
medical benefits together with our expectations of future retirement
ages.  We believe our pension and retiree medical plan assumptions are
appropriate based upon the above factors.  A one percent increase or
decrease in our health-care-cost trend rates would not have a material impact on
the results of operations of the Company.  Also, a one quarter
percentage point change in our discount rate or expected return on plan assets
would not have a material impact on the results of operations of the
Company.





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





Item
7A.                      QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





Interest
Rate Sensitivity





We are
exposed to market risk from changes in interest rates primarily through our
senior secured credit facilities, senior secured first priority notes and second
priority senior secured notes.  Our senior secured credit facilities
are comprised of (i) a $1,200.0 million term loan and (ii) a $400.0
million revolving credit facility.  At the end of fiscal 2009, $69.0
million was outstanding on the revolving credit facility.  The net
outstanding balance of the term loan at the end of fiscal 2009 was $1,173.0
million.  Borrowings under our senior secured credit facilities bear
interest, at our option, at either an alternate base rate or an adjusted
LIBOR rate for a one-, two-, three- or six month interest period, or a nine- or
twelve-month period, if available to all relevant lenders, in each case, plus an
applicable margin.  The alternate base rate is the mean
the greater of (i) Credit Suisse’s prime rate and (ii) one-half
of 1.0% over the weighted average of rates on overnight Federal Funds as
published by the Federal Reserve Bank of New York.  Our $680.6 million
of senior secured first priority notes accrue interest at a rate per annum,
reset quarterly, equal to LIBOR plus 4.75%. Our second priority senior secured
notes are comprised of (i) $525.0 million fixed rate notes and (ii) $225.0
million floating rate notes.  The floating rate notes bear interest at
a rate of LIBOR plus 3.875% per annum, which resets quarterly.


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At the
end of fiscal 2009, the LIBOR rate of 0.28% was applicable to the term loan,
senior secured first priority notes and second priority floating rate
notes.  If the LIBOR rate increases 0.25% and 0.50%, we estimate an
annual increase in our interest expense of $3.9 million and $7.7 million,
respectively.





In August
2007, Berry entered into two separate interest rate swap transactions to protect
$600.0 million of the outstanding variable rate term loan debt from future
interest rate volatility.  The swap agreements became effective in
November 2007.  The first agreement had a notional amount of $300.0
million and became effective November 5, 2007 and swaps three month variable
LIBOR contracts for a fixed two year rate of 4.875% and expires on November 5,
2009.  The second agreement had a notional amount of $300.0 million
and became effective November 5, 2007 and swaps three month variable LIBOR
contracts for a fixed three year rate of 4.920% and expires on November 5,
2010.  The Company’s term loan gives it the option to elect different
interest rate reset options.  On November 5, 2008, the Company began
and continues to utilize 1-month LIBOR contracts for the underlying senior term
loan.  The Company’s change in interest rate selection along with
their continued use of this alternative rate caused the Company to lose hedge
accounting.  The Company has recorded all subsequent changes in fair
value from November 5, 2008 to the end of fiscal 2009 in the income statement
and is amortizing the interest rate swap balance in Accumulated other
comprehensive income to Interest expense through the end of the respective swap
agreement.  The Company estimates the fair value of the interest rate
swap transactions identified above to be a liability of $14.9 million and $15.0
million at the end of fiscal 2009 and 2008, respectively.  The fair
value of these interest rate swaps is subject to movements in LIBOR and may
fluctuate in future periods.  A .25% change in LIBOR would not have a
material impact on the fair value of the interest rate swaps.





Resin
Cost Sensitivity





We are
exposed to market risk from changes in plastic resin prices that could impact
our results of operations and financial condition.  Our plastic resin
purchasing strategy is to deal with only high-quality, dependable suppliers,
such as Chevron, DAK Americas, Dow, Dupont, Eastman Chemical, Exxon Mobil, Flint
Hills Resources, Georgia Gulf, Lyondell/Bassell, Nova, PolyOne Corp., Sunoco,
Total, and Westlake.  We believe that we have maintained strong
relationships with these key suppliers and expect that such relationships will
continue into the foreseeable future.  The resin market is a global
market and, based on our experience, we believe that adequate quantities of
plastic resins will be available at market prices, but we can give you no
assurances as to such availability or the prices thereof.  If the
price of resin increased or decreased from fiscal 2009 by 5% this would result
in a material change to our cost of goods sold.





Item
8.                                 FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA




Index
      to Financial StatementsReport of Independent Registered Public Accounting
      Firm
            F-
      1Consolidated Balance Sheets at fiscal year end 2009 and
      2008
            F-
      3Consolidated Statements of Operations for the fiscal years
      ended 2009, 2008 and 2007
            F-
      4Consolidated Statements of Changes in Stockholders' Equity
      and Comprehensive Income (Loss) for the fiscal years ended 2009, 2008 and
      2007
            F-
      5Consolidated Statements of Cash Flows for the fiscal
      years ended 2009, 2008 and 2007
            F-
      6Notes to Consolidated Financial
    Statements
            F-
      7Index
      to Financial Statement SchedulesAll
      schedules have been omitted because they are not applicable or not
      required or because the required information is included in the
      consolidated financial statements or notes thereto.





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Item
9.                                CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE





None.





Item
9A.    CONTROLS AND
PROCEDURES





(a)
            Evaluation
      of disclosure controls and
procedures.





Under applicable SEC regulations, management of a reporting company, with the
participation of the principal executive officer and principal financial
officer, must periodically evaluate the company’s “disclosure controls and
procedures,” which are defined generally as controls and other procedures of a
reporting company designed to ensure that information required to be disclosed
by the reporting company in its periodic reports filed with the commission (such
as this Form 10-K) 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 at the end of
fiscal 2009.  Based on this evaluation, our Chief Executive Officer
and Chief Financial Officer concluded that, at the end of fiscal 2009, the
design and operation of our disclosure controls and procedures were effective at
the reasonable assurance level.





Management’s
Report on Internal Control over Financial Reporting





Management
is responsible for establishing and maintaining adequate internal control over
financial reporting. Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Also, projection of
any evaluation of effectiveness to future periods is subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.





Management
has conducted an assessment of the effectiveness of our internal control over
financial reporting at the end of fiscal 2009.  Management’s
assessment of internal control over financial reporting was conducted using the
criteria in Internal Control—Integrated Framework issued by the Committee of
Sponsoring  Organizations of the Treadway Commission
(“COSO”).





This
Annual Report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the Company’s registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission (“SEC”) that permit the Company to provide only Management’s
report in this Annual Report.





A
material weakness is a control deficiency, or combination of control
deficiencies, that results in the reasonable possibility that there is more than
a remote likelihood that a misstatement of our annual or interim financial
statements that is more than inconsequential will not be prevented or detected
in a timely manner. A control deficiency exists when the design or operation of
a control does not allow management or employees, in the normal course of
performing their assigned functions, to prevent or detect misstatements on a
timely basis. A design deficiency exists when a control necessary to meet the
control objective is missing or an existing control is not properly designed so
that, even if the control operates as designed, the control objective is not
always met.  In connection with management’s assessment of our
internal control over financial reporting, management has concluded that our
internal control over financial reporting was effective at the end of fiscal
2009, and that there were no material weaknesses in our internal control over
financial reporting as of that date.





(b)           Changes
in internal controls.





The
changes in our internal control over financial reporting that occurred during
fiscal 2009 that have materially affected our internal control over financial
reporting are as follows:


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·
            The
      Company transitioned and converted the legacy Covalence systems to our
      systems which resulted in cohesive disclosure controls and
      procedures.





·
            The
      Company implemented a new account reconciliation tool that has
      stream-lined our closing process.





·
            The
      Company implemented new procedures to improve the efficiency of
      identifying book to tax
differences.





Item
      9B.
            OTHER
      INFORMATION





None





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PART
III





Item
10.  DIRECTORS AND EXECUTIVE
OFFICERS OF THE REGISTRANT





The
following table provides information regarding the executive officers, officers
and members of the board of directors of Berry Group, of which we are a wholly
owned subsidiary.




Name
            Age
            TitleIra
      G. Boots (1) (3)
            55
            Chairman,
      Chief Executive Officer and DirectorR.
      Brent Beeler
            56
            President
      and Chief Operating OfficerJames
      M. Kratochvil
            53
            Executive
      Vice President, Chief Financial Officer, Assistant Treasurer and
      SecretaryAnthony M. Civale (1) (2)
            35
            DirectorPatrick J. Dalton
            41
            DirectorDonald C. Graham (1)
            76
            DirectorSteven C. Graham (2)
            50
            DirectorJoshua J. Harris
            44
            DirectorRobert V. Seminara  (1) (2) (3)
            37
            Director





(1)Member
      of the Compensation Committee.


(2)Member
      of the Audit Committee.


(3)Member
      of the Executive Committee.





The following table provides
information regarding the executive officers, officers and members of the board
of directors of Berry Plastics Corporation.





Name
            Age
            TitleIra
      G. Boots (1) (3)
            55
            Chairman,
      Chief Executive Officer and DirectorR.
      Brent Beeler
            56
            President
      and Chief Operating OfficerJames
      M. Kratochvil
            53
            Executive
      Vice President, Chief Financial Officer, Assistant Treasurer and
      SecretaryAnthony
      M. Civale (1) (2)
            35
            DirectorRobert
      V. Seminara (1) (2) (3)
            37
            Director





(1)Member
      of the Compensation Committee.


(2)Member
      of the Audit Committee.


(3)Member
      of the Executive Committee.





Ira G. Bootshas been Chairman
of the Board and Chief Executive Officer since June 2001 of Berry Plastics
Corporation, and a Director of Berry Plastics Corporation since April
1992.  Prior to that, Mr. Boots served as Chief Operating Officer of
Berry Plastics Corporation since August 2000 and Vice President of Operations,
Engineering and Product Development of Berry Plastics Corporation since April
1992.  Mr. Boots was employed by our predecessor company from 1984 to
December 1990 as Vice President, Operations.





R. Brent Beeler was named
President and Chief Operating Officer of Berry Plastics Corporation in May
2005.  He formerly served as President—Containers and Consumer
Products of Berry Plastics Corporation since October 2003 and has been an
Executive Vice President of Berry Plastics Corporation since July
2002.  He had been Executive Vice President and General
Manager—Containers and Consumer Products of Berry Plastics Corporation since
October 2002 and was Executive Vice President and General Manager—Containers
since August 2000.  Prior to that, Mr. Beeler was Executive Vice
President, Sales and Marketing of Berry Plastics Corporation since February 1996
and Vice President, Sales and Marketing of Berry Plastics Corporation since
December 1990.  Mr. Beeler was employed by our predecessor company
from October 1988 to December 1990 as Vice President, Sales and Marketing and
from 1985 to 1988 as National Sales Manager.





James M. Kratochvil has been
Executive Vice President, Chief Financial Officer and Secretary of Berry
Plastics Corporation since December 1997 and Assistant Treasurer since October
2009 (formerly Treasurer since December


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1997).  He
formerly served as Vice President, Chief Financial Officer and Secretary of
Berry Plastics Corporation since 1991, and as Treasurer of Berry Plastics
Corporation since May 1996.  He formerly served as Vice President,
Chief Financial Officer and Secretary of Holding since 1991.  Mr.
Kratochvil was employed by our predecessor company from 1985 to 1991 as
Controller.





Anthony M. Civale has
been a member of our Board of Directors since 2006.  Mr. Civale is a
Partner at Apollo Management, where he has worked since 1999.  Prior
to that time, Mr. Civale was employed by Deutsche Bank Securities in the
Financial Sponsors Group within its Corporate Finance Division.  Mr.
Civale also serves on the board of directors of Harrah’s Entertainment, Inc. and
Prestige Cruises.





Patrick J. Dalton has been a
member of our Board of Directors since 2006. Mr. Dalton joined Apollo
Management in June 2004 as a partner and as a member of Apollo Investment
Management’s (“AIM”) Investment Committee. Mr. Dalton is the President and
Chief Operating Officer of Apollo Investment Corporation (NASDAQ:
AINV).  Mr. Dalton is also the Chief Investment Officer of AIM and a
member of the Investment Committees of Apollo Investment Europe, Apollo Credit
Liquidity Fund and Artus/Apollo Loan Fund. Before joining Apollo,
Mr. Dalton was a vice president with Goldman, Sachs & Co.’s
Principal Investment Area with a focus on mezzanine investing since 2000. From
1990 to 2000, Mr. Dalton was a Vice President with the Chase Manhattan Bank
where he worked most recently in the Acquisition Finance Department.
Mr. Dalton graduated from Boston College with a BS in Finance and received
his MBA from Columbia Business School.





Donald C. Graham founded the
Graham Group, an industrial and investment concern, and has been a member of our
Board of Directors since 2006.  The Graham Group is engaged in a broad
array of businesses, including industrial process technology development,
capital equipment production, and consumer and industrial products
manufacturing.  Mr. Graham founded Graham Packaging Company, in which
he sold a controlling interest in 1998.  The Graham Group’s three
legacy industrial businesses operate in more than 80 locations worldwide, with
combined sales of more than $2.75 billion.  Mr. Graham currently
serves on the board of directors of Western Industries, Inc., National
Diversified Sales, Inc., Infiltrator Systems, Inc., Touchstone Wireless Repair
and Logistics LP, Graham Engineering Corporation and Graham Architectural
Products Corporation.





Steven C. Graham founded
Graham Partners and has been a member of our Board of Directors since
2006.  Prior to founding Graham Partners in 1998, Mr. Graham oversaw
the Graham Group’s corporate finance division starting in 1988.  Prior
to 1988, Mr. Graham was a member of the investment banking division of Goldman,
Sachs & Co., and was an Acquisition Officer for the RAF Group, a
private equity investment group.  Select board directorships which Mr.
Graham currently holds include Graham Architectural Products Corporation,
Western Industries, Inc., National Diversified Sales, Inc., Abrisa
Industrial Glass, Inc., Infiltrator Systems, Inc., Aerostructures
Acquisition, LLC, Schneller Holdings, LLC, BEMC Holdings Corporation and ICG
Commerce Holdings, Inc.  Steve is also a board member of various entities
affiliated with The Graham Group, and is a trustee of the Graham Family
Trusts.  He also serves as an Advisory Board member of certain unaffiliated
private equity funds managed by other general partners.





Joshua J. Harrishas been
a member of our Board of Directors since 2006.  Mr. Harris is a Senior
Founding Partner at Apollo Management and has served as an officer of certain
affiliates of Apollo since 1990.  Prior to that time, Mr. Harris was a
member of the Mergers and Acquisitions Department of Drexel Burnham Lambert
Incorporated.  Mr. Harris is also a director of the general partner of
AP Alternative Assets, Apollo Global Management LLC, CEVA Logistics, Hexion
Specialty Chemicals, Inc., Momentive Performance Materials, Noranda Aluminum and
Verso Paper Inc.





Robert V. Seminara has
been a member of our Board of Directors since 2006.  Mr. Seminara is a
Partner at Apollo Management, where he has worked since 2003.  Prior
to that time, Mr. Seminara was a managing director of Evercore Partners
LLC.  Mr. Seminara also serves on the boards of directors of Hexion
Specialty Chemicals, Inc. and World Kitchen Inc.





Board
Committees





Our Board
of Directors has a Compensation Committee, an Audit Committee and Executive
Committee.  The Compensation Committee makes recommendations
concerning salaries and incentive compensation for our employees and
consultants.  The Audit Committee, which consists of at least one
financial expert, recommends the annual


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appointment
of auditors with whom the Audit Committee reviews the scope of audit and
non-audit assignments and related fees, accounting principles we use in
financial reporting, internal auditing procedures and the adequacy of our
internal control procedures.





We have a
Code of Business Ethics that applies to all employees, including our Chief
Executive Officer and senior financial officers.  These standards are
designed to deter wrongdoing and to promote the highest ethical, moral and legal
conduct of all employees. Our Code of Business Ethics can be obtained, free of
charge, at our Corporate Headquarters in our Human Resources
department.





Item
11.  EXECUTIVE COMPENSATION





Compensation
Discussion and Analysis





The
Company has a Compensation Committee comprised of Messrs. Boots, Seminara,
Civale, and Donald Graham.  The annual salary and bonus paid to
Messrs. Boots, Kratochvil, Beeler, Salmon, Unfried, and all other vice
presidents and above, (collectively, the “Senior Management Group”) for fiscal
2009 were determined by the Compensation Committee in accordance with their
respective employment agreements.  The Committee makes all final
compensation decisions for our executive officers.   Below are
the principles outlining our executive compensation principles and
practices.





Compensation
Philosophy and Analysis





Our goal
as an employer is to ensure that our pay practices are equitable with regard to
market wages, facilitate appropriate retention, and to reward exceptional
performance.  The Human Resources Department obtains regional and
national compensation survey data.  In the past we have conducted
studies with Mercer, Clark Consulting, The Conference Board and Salary.com to
better understand compensation programs of other manufacturing companies similar
in size.  Our studies have reviewed base salary, bonus, and a time
based option value for one year. They have historically ignored the value of
401(k) match and medical.  We believe our programs are generally below
market.





The
Company believes that executive compensation should be designed to align closely
the interests of the Company, the executive officers, and its stockholders and
attract, motivate reward and retain superior management talent.  Berry
utilizes the following guidelines pertaining to executive
compensation:





·
            Pay
      compensation that is competitive with the practices of other manufacturing
      businesses similar in size.





·
            Wage
      enhancements aligned with the performance of the
  Company.





·
            Pay for performance
      by:





·
            Setting
      performance goals determined by our CEO and the Board of Directors for our
      officers and providing a short-term incentive through a bonus plan that is
      based upon achievement of these
goals.





·
            Providing
      long-term incentives in the form of stock options, in order to retain
      those individuals with the leadership abilities necessary for increasing
      long-term shareholder value while aligning with the interests of our
      investors.





Role
of Compensation Committee





The
Compensation Committee’s specific roles are:





·
            to
      approve and recommend to our Board of Directors all compensation plans for
      (1) the CEO of the Company, (2) all employees of the Company and its
      subsidiaries who report directly to the CEO, and (3) other members of the
      Senior Management Group, as well as all compensation for our Board of
      Directors;




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·
            to
      approve the short-term compensation of the Senior Management Group and to
      recommend short-term compensation for members of our Board of
      Directors;




·
            to
      approve and authorize grants under the Company’s or its subsidiaries’
      incentive plans, including all equity plans and long-term incentive plans;
      and




·
            to
      prepare any report on executive compensation required by Securities and
      Exchange Commission rules and regulations for inclusion in our annual
      proxy statement, if any.




Role
of Executives Officers





Ira
Boots, Chairman and Chief Executive Officer, Brent Beeler, Chief Operating
Officer, Jim Kratochvil, Chief Financial Officer and Marcia Jochem, Executive
Vice President of Human Resources annually review the performance of each of our
executive officers.  Together they review annual goals and the
performance of each individual executive officer.  This information,
along with the performance of the company and market data determines the wage
adjustment recommendation presented to the Compensation
Committee.   All other compensation decisions with respect to
officers of the Company are made by Mr. Boots pursuant to policies established
in consultation with the Compensation Committee and recommendations from the
Human Resource Department.





The
Compensation Committee evaluates the performance of the CEO and determines the
CEO’s compensation in light of the goals and objectives of the compensation
program. On at least an annual basis, the Compensation Committee expects to
review the performance of the CEO as compared with the achievement of the
Company’s goals and any individual goals. The CEO together with the Human
Resource Department will assess the performance and compensation of the other
named executives. The Human Resource Department, together with the CEO, annually
will review the performance of each member of the Senior Management Group as
compared with the achievement of Company or operating division goals, as the
case may be, together with each executive’s individual goals. The Compensation
Committee can exercise its discretion in modifying any recommended adjustments
or awards to the executives. Both performance and compensation are evaluated to
ensure that the Company is able to attract and retain high quality executives in
vital positions and that their compensation, taken as a whole, is competitive
and appropriate compared to that of similarly situated executives in other
corporations within the industry.





Executive
Compensation Program





The
compensation for our executive officers is primarily in the following three
categories:  (1) salary, (2) bonus, and (3) stock
options.  Berry has selected these elements because each is considered
useful and/or necessary to meet one or more of the principal objectives of the
business.  Base salary and bonus targets are set with the goal of
motivating employees and adequately compensating and rewarding them on a
day-to-day basis for the time spent and the services they
perform.  Our equity programs are geared toward providing an incentive
and reward for the achievement of long-term business objectives, retaining key
talent and more closely aligning the interests of management with our
shareholders.





The
compensation program is reviewed on an annual basis.  In setting
individual compensation levels for a particular executive, the total
compensation package is considered along with the executive’s past and expected
future contributions to our business.





Base
Salary





Our
executive officers’ base salaries depend on their position within the Company
and its subsidiaries, the scope of their responsibilities and the period during
which they have been performing those responsibilities and their overall
performance. Base salaries are reviewed annually, and will be adjusted from time
to time to realign salaries with market levels after taking into account
individual responsibilities and performance and experience.





Annual
Bonus


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Berry has
a long history of sharing profits with employees. This philosophy is imbedded in
the corporate culture and is one of many practices that have enabled the Company
to continually focus on improvement and be successful. Below is the calculation,
funding and annual payment practice for the Executive program which is subject
to approval every year by the Board of Directors.  It is our goal to
exceed our commitments year after year. Our executive officers participate in
our Executive Profit Sharing Bonus Program.  Depending on our overall
business performance specifically related to EBITDA and Company growth and each
executive’s individual performance, he or she would be eligible to receive a
bonus ranging from zero to 108% his or her base salary.  These target
ranges are the same for all of the Vice Presidents and above positions and are
subject to change at the discretion of the Compensation
Committee.  The performance period is measured from January 1 through
December 31 of the respective year, and does not coincide with our externally
reported fiscal year-end.  Performance objectives are generally set on
an annualized basis.





1.
Calculation:


75% -
based on achieving 100% of annual EBITDA target


25% -
based on growing the equity value of the Company





2.Funding:


By
meeting both targets, executives qualify to earn 68.5% of their annualized
salary in a bonus payment.  This bonus payment slides up or down
depending on the performance of the Company.





3.    
      Payment:


With
Board approval, bonus is paid on an annual basis, which normally happens at the
end of February, but may be paid at an earlier date at the election of the
Compensation Committee.





The
Compensation Committee is currently working with Apollo to determine the
performance metrics to apply to our 2010 bonus plan year, and we expect that our
executive officers will continue to be subject to the same financial performance
metrics as other salaried employees of the Company.





Stock
Options





In 2006
we adopted the Equity Incentive Plan which permits us to grant stock options,
rights to purchase shares, restricted stock, restricted stock units, and
other-stock based rights to employees or directors of, or consultants to, us, or
any of our subsidiaries. The Equity Incentive Plan is administered by our Board
of Directors or, if determined by such board, by the Compensation Committee of
the board. Approximately 801 thousand shares of our common stock have
been reserved for issuance under the Equity Incentive Plan.





As
discussed below, we have awarded stock options to members of our
management.  However, the Compensation Committee has not established
any formal program, plan or practice for the issuance of equity awards to
employees.  We do not have any program, plan or practice in place for
selecting grant dates for awards under the Equity Incentive Plan in coordination
with the release of material non-public information. Under the Equity Incentive
Plan, the exercise price for the option awards is the fair market value of the
stock of Berry on the date of grant. The fair market value is determined by the
Board of Directors by applying industry appropriate multiples to our current
EBITDA, and this valuation takes into account a level of net debt that excluded
cash required for working capital purposes.  The Compensation
Committee is not prohibited from granting awards at times when it is in
possession of material non-public information. However, no inside information
was taken into account in determining the number of options previously awarded
or the exercise price for those awards, and we did not “time” the release of any
material non-public information to affect the value of those awards.





The
Compensation Committee believes that the granting of awards under the Equity
Incentive Plan promotes, on a short-term and long-term basis, an enhanced
personal interest and alignment of interests of those executives receiving
equity awards with the goals and strategies of the Company. The Compensation
Committee also believes that the equity grants provide not only financial
rewards to such executives for achieving Company goals but also provide
additional incentives for executives to remain with the Company.





From time
to time, we grant management participants stock options that are subject to the
terms of the Equity Incentive Plan.  In connection with the grants, we
enter into stock option award agreements with the management
participants.


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Generally,
the options will become vested and exercisable over a five year
period.  The time based options vest 20% each year and the performance
based option grants vest over a five year period when certain EBITDA targets are
met. In each case, the vesting of options is generally subject to the
grantee’s continued provision of services to the Company or one of its
subsidiaries as of the applicable vesting date.





Berry
also clarified the anti-dilution provisions of its stock option plans to require
payment to holders of outstanding stock options of special dividends and a
pro-rata share of transaction fees that may be paid to Apollo and Graham in
connection with future transactions, re-financings, etc.   In
connection with the June 2007 dividend paid, holders of vested stock options
received $13.7 million, while an additional $34.5 million will be paid to
nonvested option holders on the second anniversary of the dividend grant date
(assuming the nonvested option holders remain employed by the
Company).  In December 2008, the Executive Committee of Berry Group
modified the vesting provisions which resulted in payment of this remaining
amount of $33.0 million to the participants on December 2008.





The
maximum term of these options is ten years. However, subject to certain
exceptions set forth in the applicable stock option award agreement, unvested
options will automatically expire 90 days after the date of a grantee’s
termination of employment, or one year in the case of termination due to death
or disability. In the case of a termination of employment due to death or
disability, an additional 20% of an individual’s options will
vest.  20% of outstanding options may become vested earlier
upon  a “change in control” of Berry, and 40% of outstanding options
become vested earlier if such change in control results in the achievement of a
targeted internal rate of return.





Shares of
Company common stock acquired under the Equity Incentive Plan are subject to
restrictions on transfer, repurchase rights, and other limitations set forth in
a stockholder’s agreement.





Post-Employment
Compensation.





We
provide post-employment compensation to our employees, including our named
executive officers, as a continuance of the post-retirement programs sponsored
by prior owners. The Compensation Committee believes that offering such
compensation allows us to attract and retain qualified employees and executives
in a highly competitive marketplace and rewards our employees and executives for
their contribution to the Company during their employment. A principal component
of our post-employment executive officer compensation program is a qualified
defined contribution 401(k) plan and a retirement health plan.  Our
executive officers are eligible to participate in our company-wide 401(k)
qualified plan for employees.  The Company awards a $200 lump sum
contribution annually for participating in the plan and matches dollar for
dollar the first $300 dollars, and a 10% match
thereafter.  Participants who contribute at least $1,000 will also
receive an addition $150 lump sum deposit at the end of the
year.  Company matching contributions are 100% vested
immediately.  We also offer our employees a retirement health
plan.




Perquisites and Other Personal
Benefits.





While we
believe that perquisites should be a minor part of executive compensation, we
recognize the need to provide our executive officers with perquisites and other
personal benefits that are reasonable, competitive and consistent with the
overall compensation program in order to enable us to attract and retain
qualified employees for key positions.  Accordingly, we provide our
executive officers with leased company vehicles including maintenance and
operational cost.  The Compensation Committee periodically reviews the
perquisites provided to our executive officers.





Messrs.
Seminara and Civale are partners in Apollo Management.  Donald Graham
is the founder of the Graham Group.  See the section of this Form 10-K
titled “Certain Relationships and Related Transactions” for a description of
transactions between us and various affiliates of Apollo and Graham.


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The
following table sets forth a summary of the compensation paid by us to our Chief
Executive Officer, Chief Financial Officer and three other most highly
compensated executive officers (collectively, the “Named Executive Officers”)
for services rendered in all capacities to us during fiscal 2009, 2008 and
2007.





Summary
Compensation Table





Name and Principal Position
            Fiscal
              Year
            Salary
            Option
      Awards ($)
            Bonus
            All
      Other
              Compensation
            Total ($)Ira
      G. Boots
              Chairman and Chief Executive
      Officer
            2009
              2008
              2007
            $889,047
              893,930
              760,434
            $—
              —
              —
            $172,464
              599,732
              649,431
            $
      —
              —
              —
            $1,061,511
              1,493,662
              1,409,865James
      M. Kratochvil
              Executive Vice President, Chief
      Financial Officer, Treasurer and Secretary
            2009
              2008
              2007
            $470,525
              475,020
              406,602
            $—
              —
              —
            $91,352
              318,631
              349,694
            $
      —
              —
              —
            $561,877
              793,651
              756,296R.
      Brent Beeler
              President and Chief Operating
      Officer
            2009
              2008
              2007
            $663,320
              669,887
              605,119
            $—
              —
              —
            $131,908
              468,756
              549,519
            $
      —
              —
              —
            $795,228
              1,138,643
              1,154,638Thomas
      E. Salmon
              President – Tapes &Coatings
      Division
            2009
              2008
              2007
            $391,287
              385,889
              353,277
            $—
              —
              —
            $76,143
              262,799
              139,487
            $
      —
              —
              —
            $467,430
              648,688
              492,764G.
      Adam Unfried
              President – Rigid Open Top
      Division
            2009
              2008
              2007
            $300,306
              283,057
              259,953
            $—
              —
              —
            $55,865
              201,634
              249,781
            $
      —
              —
              —
            $356,171
              484,691
              509,734





Employment
Agreements





In
connection with the Merger with Covalence, Berry entered into employment
agreements with each of Messrs. Boots, Beeler and Kratochvil that supersede
their previous employment agreements with Berry and that expire on December 31,
2011.  Mr. Unfried entered into an amendment to his existing
employment agreement with Berry that extended the term of such agreement through
December 31, 2011.  Mr. Salmon entered into an employment agreement
with Berry that expires April 3, 2012 (each of the agreements with Messrs.
Boots, Beeler, Kratochvil, Salmon and Unfried, as amended, an “Employment
Agreement” and, collectively, the “Employment Agreements”). The Employment
Agreements provided for base compensation as disclosed in the “Summary
Compensation Table” above.  Salaries are subject in each case to
annual adjustment at the discretion of the Compensation Committee of the Board
of Directors.  The Employment Agreements entitle each executive to
participate in all other incentive compensation plans established for executive
officers of Berry.  Berry may terminate each Employment Agreement for
“cause” or a “disability” (as such terms are defined in the Employment
Agreements). Specifically, if any of Messrs. Boots, Beeler, Kratochvil, Salmon,
and Unfried is terminated by Berry without ‘‘cause’’ or resigns for ‘‘good
reason’’ (as such terms are defined in the Employment Agreements), that
individual is entitled to: (1) the greater of (a) base salary until the later of
one year after termination or (b) 1/12 of 1 year’s base salary for each year of
employment up to 30 years with Berry Plastics Corporation or a predecessor in
interest (excluding Messrs. Salmon and Unfried which would be entitled to (a)
only) and (2) the pro rata portion of his annual bonus. Each Employment
Agreement also includes customary noncompetition, nondisclosure and
nonsolicitation provisions.





Grants
of Plan-Based Awards for Fiscal 2009





No
      options were granted to our named executive officers in fiscal
      2009.


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Outstanding
Equity Awards at Fiscal Year-End Table





Name
            Number
      of Securities Underlying Unexercised Options (#) Exercisable
            Number
      of Securities Underlying Unexercised Options (#) Unexercisable
            Option
      Exercise Price
            Option
      Expiration DateIra
      G. Boots
            25,131
            11,292
            $100
            9/20/16James
      M. Kratochvil
            14,395
            6,467
            $100
            9/20/16R.
      Brent Beeler
            14,395
            6,467
            $100
            9/20/16G.
      Adam Unfried
            9,438
            4,242
            $100
            9/20/16Thomas
      E. Salmon
            1,231
            1,505
            $100
            6/04/17Thomas
      E. Salmon
            2,257
            5,267
            $112.83
            1/01/18





Option
Exercises for 2009





No
options were exercised by our named executive officers in fiscal
2009.





Compensation
for Directors





Non-employee
directors receive $12,500 per quarter plus $2,000 for each meeting they attend
and are reimbursed for out-of-pocket expenses incurred in connection with their
duties as directors.  For fiscal 2009, we paid non-employee directors’
fees on a combined basis as shown in the following table.





Director
Compensation Table for Fiscal 2009




Name
            Fees
      Earned or Paid in Cash
      ($)
            Option
      Awards ($)
            Total ($)Anthony
      M. Civale
            $50,000
            $—
            $50,000Patrick
      J. Dalton
            50,000
            —
            50,000Donald
      C. Graham
            50,000
            —
            50,000Steven
      C. Graham
            50,000
            —
            50,000Joshua
      J. Harris
            50,000
            —
            50,000Robert
      V. Seminara
            50,000
            —
            50,000





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Item
      12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
      MANAGEMENT AND RELATED STOCKHOLDER MATTERS





Stock
Ownership





We are a
wholly-owned subsidiary of Berry Group.  The following table sets
forth certain information regarding the beneficial ownership of the common
stock, of Berry Group with respect to each person that is a beneficial owner of
more than 5% of its outstanding common stock and beneficial ownership of its
common stock by each director and each executive officer named in the Summary
Compensation Table and all directors and executive officers as a group at the
end of fiscal 2009.





Name and Address of
      Owner(1)
            
            Number
      of Shares of
              Common Stock(1)
            Percent
      of ClassApollo
      Investment Fund VI, L.P. (2)
            
            3,559,930
            
            48.4
            %Apollo
      Investment Fund V, L.P. (3)
            
            1,902,558
            
            25.8
            %AP
      Berry Holdings, L. P (4)
            
            1,641,269
            
            22.3
            %Graham
      Berry Holdings, LP (5)
            
            500,000
            
            6.8
            %Ira
      G. Boots (6)
            
            144,526
            
            2.0
            %R.
      Brent Beeler (6)
            
            82,405
            
            1.1
            %James
      M. Kratochvil (6)
            
            82,182
            
            1.1
            %G.
      Adam Unfried (6)
            
            21,556
            
            *Thomas
      E. Salmon (6)
            
            6,139
            
            *Anthony
      M. Civale (7),(8)
            
            3,531
            
            *Patrick
      J. Dalton (7),(8)
            
            2,000
            
            *Donald
      C. Graham (7),(9)
            
            2,000
            
            *Steven
      C. Graham (7),(9)
            
            2,000
            
            *Joshua
      J. Harris (7),(8)
            
            3,531
            
            *Robert
      V. Seminara (7),(8)
            
            3,531
            
            *All
      directors and executive officers as a group (11 persons)
            
            353,401
            
            4.8
            %


* Less than 1% of common stock
outstanding.





(1)   The
amounts and percentages of common stock beneficially owned are reported on the
basis of regulations of the SEC governing the determination of beneficial
ownership of securities.  Under the rules of the SEC, a person is
deemed to be a “beneficial owner” of a security if that person has or shares
voting power, which includes the power to vote or direct the voting of such
security, or investment power, which includes the power to dispose of or to
direct the disposition of such security.  Securities that can be so
acquired are deemed to be outstanding for purposes of computing such person’s
ownership percentage, but not for purposes of computing any other person’s
percentage.  Under these rules, more than one person may be deemed
beneficial owner of the same securities and a person may be deemed to be a
beneficial owner of securities as to which such person has no economic
interest.  Except as otherwise indicated in these footnotes, each of
the beneficial owners has, to our knowledge, sole voting and investment power
with respect to the indicated shares of common stock.





(2)   Represents
all equity interests of Berry Group held of record by controlled affiliates of
Apollo Investment Fund VI, L.P., including AP Berry Holdings, LLC and BPC
Co-Investment Holdings, LLC.  Apollo Management VI, L.P. has the
voting and investment power over the shares held on behalf of
Apollo.  Each of Messrs. Civale, Dalton, Harris, and Seminara, who
have relationships with Apollo, disclaim beneficial ownership of any shares of
Berry Group that may be deemed beneficially owned by Apollo Management VI, L.P.,
except to the extent of any pecuniary interest therein.  Each of
Apollo Management VI, L.P., AP Berry Holdings, LLC and its affiliated investment
funds disclaims beneficial ownership of any such shares in which it does not
have a pecuniary interest.  The address of Apollo Management VI, L.P.,
Apollo Investment Fund VI, L.P., and AP Berry Holdings LLC is c/o Apollo
Management, L.P., 9 West 57th Street, New York, New York 10019.


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(3)   Represents
all equity interests of Berry Group held of record by controlled affiliates of
Apollo Investment Fund V, L.P., including Apollo V Covalence Holdings, LLC and
Covalence Co-Investment Holdings, L.P.  Apollo Management V, L.P. has
the voting and investment power over the shares held on behalf of
Apollo.  Each of Messrs. Civale, Dalton, Harris, and Seminara, who
have relationships with Apollo, disclaim beneficial ownership of any shares of
Berry Group that may be deemed beneficially owned by Apollo Management V, L.P.,
except to the extent of any pecuniary interest therein.  Each of
Apollo Management V, L.P., Apollo V Covalence Holdings, LLC and its affiliated
investment funds disclaims beneficial ownership of any such shares in which it
does not have a pecuniary interest.  The address of Apollo Management
V, L.P., Apollo Investment Fund V, L.P., and Apollo V Covalence Holdings, LLC is
c/o Apollo Management, L.P., 9 West 57th Street, New York, New York
10019.





(4)   The
address of AP Berry Holdings LLC is c/o Apollo Management, L.P., 9 West 57th
Street, New York, New York 10019.





(5)   Graham
Partners II, L.P., as the sole member of the general partner of Graham Berry
Holdings, L.P., has the voting and investment power over the shares held by
Graham Berry Holdings, L.P.  Each of Messrs. Steven Graham and Donald
Graham, who have relationships with Graham Partners II, L.P. and/or Graham Berry
Holdings L.P., disclaim beneficial ownership of any shares of Berry Group that
may be deemed beneficially owned by Graham Partners II, L.P. or Graham Berry
Holdings L.P. except to the extent of any pecuniary interest
therein.  Each of Graham Partners II, L.P. and its affiliates
disclaims beneficial ownership of any such shares in which it does not have a
pecuniary interest.  The address of Graham Partners II, L.P. and
Graham Berry Holdings, L.P. is 3811 West Chester Pike, Building 2, Suite 200
Newton Square, Pennsylvania 19073.





(6)   The
address of Messrs. Boots, Beeler, Kratochvil, Unfried, and Salmon is c/o Berry
Plastics Corporation, 101 Oakley Street,  Evansville, Indiana
47710.  Total includes underlying options that are vested or scheduled
to vest within 60 days of November 5, 2009





(7)   Total
represents underlying options that are vested or scheduled to vest within 60
days of November 5, 2009 for each of Messrs. Civale, Dalton, Donald Graham,
Steven Graham, Harris and Seminara.





(8)   The
address of Messrs. Civale, Harris, Seminara and Dalton is c/o Apollo Management,
L.P., 9 West 57th Street, New York, New York 10019.





(9)   The
address of Messrs. Steven Graham and Donald Graham is c/o Graham Partners II,
L.P. is 3811 West Chester Pike, Building 2, Suite 200 Newtown Square,
Pennsylvania 19073.


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Equity
Compensation Plan Information





The
following table provides information as of the end of fiscal 2009 regarding
shares of common stock of Berry Group that may be issued under our existing
equity compensation plan.





Plan
      category
            Number
      of securities to be issued upon exercise of outstanding options, warrants
      and rights
            Weighted
      Average exercise price of outstanding options, warrants and
      rights
            Number
      of securities remaining available for future issuance under equity
      compensation plan (excluding securities referenced in column
      (a))(a)
            (b)
            (c)Equity
      compensation plans approved by security holders
            —
            —
            —Equity
      compensation plans not approved by security holders (1)
            801,003(2)
            99.45
            6,249Total
            801,003
            99.45
            6,249





(1)Consists
      of the 2006 Equity Incentive Plan which our Board adopted in September
      2006.


(2)Does
      not include shares of Berry Group Common Stock already purchased as such
      shares are already reflected in the Company’s outstanding
      shares.





2006
Equity Incentive Plan





In 2006,
we have adopted an equity incentive plan for the benefit of certain of our
employees, which we refer to as the 2006 Equity Incentive Plan.  The
purpose of the 2006 Equity Incentive Plan is to further our growth and success,
to enable our directors, executive officers and employees to acquire shares of
our common stock, thereby increasing their personal interest in our growth and
success, and to provide a means of rewarding outstanding performance by such
persons.  Options granted under the 2006 Equity Incentive Plan may not
be assigned or transferred, except to us or by will or the laws of descent or
distribution.  The 2006 Equity Incentive Plan terminates ten years
after adoption and no options may be granted under the plan
thereafter.  The 2006 Equity Incentive Plan allows for the issuance of
non-qualified options, options intended to qualify as “incentive stock options”
within the meaning of the Internal Revenue Code of 1986, as amended, and stock
appreciation rights.




The
employees participating in the 2006 Equity Incentive Plan receive options and
stock appreciation rights under the 2006 Equity Incentive Plan pursuant to
individual option and stock appreciation rights agreements, the terms and
conditions of which are substantially identical.  Each option
agreement provides for the issuance of options to purchase common stock of Berry
Group.




At the
end of fiscal 2009, there were outstanding options to purchase 796,325 shares of
Berry Group’s common stock and stock appreciation rights with respect to 4,678
shares of Berry Group’s common stock.







Item
13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND
DIRECTOR INDEPENDENCE





Stockholders
Agreement with Management





We make
cash payments to Berry Group to enable it to pay any (i) federal, state or
local income taxes to the extent that such income taxes are directly
attributable to our and our subsidiaries’ income, (ii) franchise taxes and
other fees required to maintain Berry Group’s legal existence and
(iii) corporate overhead expenses incurred in the ordinary course of
business and salaries or other compensation of employees who perform services
for both Berry Group and us.





In
connection with the Merger with Covalence, Apollo and Graham Partners (“Graham”)
and certain of our employees who invested in Berry Group entered into a
stockholders agreement.  The stockholders agreement provides for,
among


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other
things, a restriction on the transferability of each such person’s equity
ownership in us, tag-along rights, drag-along rights, piggyback registration
rights and repurchase rights by us in certain circumstances.





The
Company is charged a management fee by Apollo Management VI, L.P., an affiliate
of its principal stockholder and Graham Partners, for the provision of
management consulting and advisory services provided throughout the
year.  The management fee is the greater of $3.0 million or 1.25% of
adjusted EBITDA.  In addition, Apollo and Graham have the right to
terminate the agreement at any time, in which case Apollo and Graham will
receive additional consideration equal to the present value of $21 million less
the aggregate amount of annual management fees previously paid to Apollo and
Graham, and the employee stockholders will receive a pro rata payment based on
such amount.





The
Company paid $4.4 million to entities affiliated with Apollo Management, L.P.
and $0.6 million to entities affiliated with Graham Partners, Inc. collectively
for fiscal 2009.





Certain
of our management, stockholders and related parties and its affiliates have
independently acquired and hold financial debt instruments of the
Company.  During fiscal 2009, interest expense includes $7.5 million
related to this debt.





Item
14.  PRINCIPAL ACCOUNTING FEES AND SERVICES





The
following presents fees for professional audit services rendered by
Ernst & Young LLP for the audit of the Company’s annual consolidated
financial statements for fiscal 2009 and 2008, and fees for other services
rendered by Ernst & Young LLP for fiscal 2009 and 2008.


2009
            
            2008Audit
      fees
            (1)
            
            $1.3
            
            $2.3Audit-related
      fees
            (2)
            
            —
            
            —Tax
      fees
            (3)
            
            0.3
            
            0.6All
      other fees
            
            
            —
            
            —$1.6
            
            $2.9





(1)Audit
      Fees.  This category includes fees and expenses billed by
      E&Y for the audits of the Company’s financial statements and for the
      reviews of the financial statements included in the Company’s Quarterly
      Reports on Form 10-Q. This category also includes services associated with
      SEC registration statements, periodic reports, and other documents issued
      in connection with securities
offerings.


(2)Audit Related
      Fees. This category includes fees and expenses billed by E&Y
      for assurance and related services that are reasonably related to the
      performance of the audit or review of the Company’s financial statements.
      This category includes fees for due diligence, other audit-related
      accounting and SEC reporting services and certain agreed upon
      services.


(3)Tax
      Fees.  This category includes fees and expenses billed by
      E&Y for domestic and international tax compliance and planning
      services and tax advice.


(4)All Other
      Fees.  There were no other fees billed by
      E&Y.





The Audit
Committee has established its pre-approval policies and procedures, pursuant to
which the Audit Committee approved the foregoing audit and permissible non-audit
services provided by our principal accounting firms in fiscal 2009 and
2008.  Consistent with the Audit Committee’s responsibility for
engaging our independent auditors, all audit and permitted non-audit services
require pre-approval by the Audit Committee.  All requests or
applications for services to be provided by the independent auditor that do not
require specific approval by the Audit Committee will be submitted to the Chief
Financial Officer and must include a detailed description of the services to be
rendered.  The Chief Financial Officer will determine whether such
services are included within the services that have received pre-approval of the
Audit Committee.  The Audit Committee will be informed on a timely
basis of any such services rendered by the independent
auditor.  Request or applications to provide services that require
specific approval by the Audit Committee will be submitted to the Audit
Committee by both the independent auditor and the Chief Financial
Officer.  The Chief Financial Officer and management will immediately
report to the Audit Committee any breach of this policy that comes to the
attention of the Chief Financial Officer or any member of
management.  Pursuant to these


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procedures
the Audit Committee approved the audit and permissible non-audit services
provided by the principalaccounting firms in
fiscal 2009 and 2008.

















PART
IV





Item
15.    EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES








1.Financial
      Statements





The
      financial statements listed under Item 8 are filed as part of this
      report.





2.Financial Statement
      Schedules





Schedules
      have been omitted because they are either not applicable or the required
      information has been disclosed in the financial statements or notes
      thereto.





3.Exhibits





The
      exhibits listed on the accompanying Exhibit Index are filed as part of
      this report.











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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





The Board
of Directors and Stockholders


Berry
Plastics Corporation





We have
audited the accompanying consolidated balance sheets of Berry Plastics
Corporation (a wholly owned subsidiary of Berry Plastics Group, Inc.) as of
September 26, 2009 and September 27, 2008, and the related consolidated
statements of operations, changes in stockholders' equity and comprehensive
income (loss), and cash flows for each of the three years in the period ended
September 26, 2009. These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these
financial statements based on our audits.





We
conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. We were not engaged
to perform an audit of the Company’s internal control over financial reporting.
Our audits included consideration of internal control over financial reporting
as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.





In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Berry Plastics
Corporation at September 26, 2009 and September 27, 2008 and the consolidated
results of its operations and its cash flows for the three years in the period
ended September 26, 2009, in conformity with U.S. generally accepted accounting
principles.











/s/ Ernst
and Young LLP





Indianapolis,
Indiana


November
24, 2009





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Berry Plastics Corporation


Consolidated Balance Sheets


(In
Millions of Dollars)





September
      26, 2009
            
            
            September
      27, 2008AssetsCurrent
      assets:Cash and cash
      equivalents
            
            $
            10.0
            
            
            $
            189.7Accounts receivable (less allowance for doubtful accounts of $9.0 and
      $12.1 at fiscal year end 2009 and 2008, respectively)
            
            
            333.2
            
            
            
            422.5Inventories:Finished
goods
            
            
            219.6
            
            
            
            306.1Raw materials and
      supplies
            
            
            154.4
            
            
            
            194.2374.0
            
            
            
            500.3Deferred income
      taxes
            
            
            44.0
            
            
            
            35.3Prepaid expenses and other
      current assets
            
            
            30.4
            
            
            
            49.3Total
      current assets
            
            
            791.6
            
            
            
            1,197.1Property,
      plant and equipment:Land
            
            
            38.9
            
            
            
            39.1Buildings and
      improvements
            
            
            173.2
            
            
            
            165.3Equipment and construction in
      progress
            
            
            1,126.2
            
            
            
            978.51,338.3
            
            
            
            1,182.9Less accumulated
      depreciation
            
            
            462.7
            
            
            
            320.1875.6
            
            
            
            862.8Goodwill,
      intangible assets and deferred costs
            
            
            2,538.6
            
            
            
            2,662.2Other
      assets
            
            
            195.2
            
            
            
            2.02,733.8
            
            
            
            2,664.2Total
      assets
            
            $
            4,401.0
            
            
            $
            4,724.1


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Berry Plastics Corporation Consolidated
Balance Sheets (continued)
 (In
Millions of Dollars)


September
      26, 2009
            
            September
      27, 2008Liabilities
      and stockholders' equityCurrent
      liabilities:Accounts payable
            $   229.8
            
            $   253.8Accrued expenses and other
      current liabilities
            192.9
            
            206.6Current portion of long-term debt
            17.5
            
            21.4Total
      current liabilities
            440.2
            
            481.8Long-term
      debt, less current portion
            3,342.2
            
            3,578.2Deferred
      income taxes
            194.9
            
            212.3Other
      long-term liabilities
            102.0
            
            99.9Total
      liabilities
            4,079.3
            
            4,372.2Commitments
      and contingenciesStockholders'
      equity:Parent company
      investment, net
            629.2
            
            617.2Accumulated
      deficit
            (279.2)
            
            (253.0)Accumulated
      other comprehensive loss
            (28.3)
            
            (12.3)Total stockholders’ equity
            321.7
            
            351.9Total
      liabilities and stockholders' equity
            $4,401.0
            
            $4,724.1





See
notes to consolidated financial statements.


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Berry Plastics
Corporation


Consolidated Statements of
Operations


(In
Millions of Dollars)








Fiscal
      years endedSeptember
      26, 2009
            
            September
      27, 2008
            
            September
      29, 2007Net
      sales
            $3,187.1
            
            $3,513.1
            
            $3,055.0Cost
      of goods sold
            2,641.1
            
            3,019.3
            
            2,583.4Gross
      profit
            546.0
            
            493.8
            
            471.6Operating
      expenses:Selling, general and
      administrative
            325.2
            
            340.0
            
            321.5Restructuring and impairment
      charges, net
            11.3
            
            9.6
            
            39.1Other operating expenses
            23.7
            
            32.8
            
            43.6Operating
      income
            185.8
            
            111.4
            
            67.4Other
      expense (income)
            (30.4)
            
            —
            
            37.3Interest
      expense
            262.8
            
            262.3
            
            239.8Interest
      income
            (18.3)
            
            (0.6)
            
            (2.2)Net
      loss from continuing operations before income taxes
            (28.3)
            
            (150.3)
            
            (207.5)Income
      tax benefit
            (6.3)
            
            (49.2)
            
            (88.6)Net
      loss from continuing operations
            (22.0)
            
            (101.1)
            
            (118.9)Minority
      interest
            —
            
            —
            
            (2.7)Discontinued
      operations, net of tax
            4.2
            
            —
            
            —Net
      loss
            $  (26.2)
            
            $  (101.1)
            
            $  (116.2)





See
notes to consolidated financial statements.


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Berry Plastics Corporation


Consolidated Statements of Changes in Stockholders'


Equity and Comprehensive Income (Loss)


(In
Millions of Dollars)





Parent
      Company Investment, net
            
            
            Accumulated
      Other Comprehensive Income (Loss)
            
            
            Accumulated
      Deficit
            
            
            Total
            
            
            Comprehensive
      Income (Loss)Balance
      at September 30, 2006
            
            $
            440.6
            
            
            $
            0.2
            
            
            $
            (31.2
            )
            
            $
            409.6Stock
      compensation expense
            
            
            19.6
            
            
            
            —
            
            
            
            —
            
            
            
            19.6Net
      transfers to parent
            
            
            (102.5
            )
            
            
            —
            
            
            
            —
            
            
            
            (102.5
            )Minority
      interest acquisition
            
            
            240.4
            
            
            
            0.2
            
            
            
            (4.5
            )
            
            
            236.1Net
      loss
            
            
            —
            
            
            
            —
            
            
            
            (116.2
            )
            
            
            (116.2
            )
            
            $
            (116.2
            )Currency
      translation
            
            
            —
            
            
            
            3.7
            
            
            
            —
            
            
            
            3.7
            
            
            
            3.7Interest
      rate hedges, net of tax
            
            
            —
            
            
            
            (3.0
            )
            
            
            —
            
            
            
            (3.0
            )
            
            
            (3.0
            )Adoption
      of SFAS No. 158, net of tax
            
            
            —
            
            
            
            2.7
            
            
            
            —
            
            
            
            2.7
            
            
            
            —Balance
      at September 29, 2007
            
            
            598.1
            
            
            
            3.8
            
            
            
            (151.9
            )
            
            
            450.0
            
            
            
            (115.5
            )Stock
      compensation expense
            
            
            19.6
            
            
            
            —
            
            
            
            —
            
            
            
            19.6Net
      transfers to parent
            
            
            (0.5
            )
            
            
            —
            
            
            
            —
            
            
            
            (0.5
            )Net
      loss
            
            
            —
            
            
            
            —
            
            
            
            (101.1
            )
            
            
            (101.1
            )
            
            
            (101.1
            )Currency
      translation
            
            
            —
            
            
            
            (4.7
            )
            
            
            —
            
            
            
            (4.7
            )
            
            
            (4.7
            )Interest
      rate hedges, net of tax
            
            
            —
            
            
            
            (5.0
            )
            
            
            —
            
            
            
            (5.0
            )
            
            
            (5.0
            )Defined
      benefit pension and retiree health benefit plans, net of
    tax
            
            
            —
            
            
            
            (6.4
            )
            
            
            —
            
            
            
            (6.4
            )
            
            
            (6.4
            )Balance
      at September 27, 2008
            
            
            617.2
            
            
            
            (12.3
            )
            
            
            (253.0
            )
            
            
            351.9
            
            
            
            (117.2
            )Stock
      compensation expense
            
            
            12.4
            
            
            
            —
            
            
            
            —
            
            
            
            12.4Net
      transfers to parent
            
            
            (0.4
            )
            
            
            —
            
            
            
            —
            
            
            
            (0.4
            )Interest
      rate hedge amortization
            
            
            —
            
            
            
            7.6
            
            
            
            —
            
            
            
            7.6Net
      loss
            
            
            —
            
            
            
            —
            
            
            
            (26.2
            )
            
            
            (26.2
            )
            
            
            (26.2
            )Currency
      translation
            
            
            —
            
            
            
            (16.3
            )
            
            
            —
            
            
            
            (16.3
            )
            
            
            (16.3
            )Interest
      rate hedges, net of tax
            
            
            —
            
            
            
            (3.7
            )
            
            
            —
            
            
            
            (3.7
            )
            
            
            (3.7
            )Defined
      benefit pension and retiree health benefit plans, net of
    tax
            
            
            —
            
            
            
            (3.6
            )
            
            
            —
            
            
            
            (3.6
            )
            
            
            (3.6
            )Balance
      at September 26, 2009
            
            $
            629.2
            
            
            $
            (28.3
            )
            
            $
            (279.2
            )
            
            $
            321.7
            
            
            $
            (49.8
            )





See
notes to consolidated financial statements.


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Berry Plastics Corporation


Consolidated
Statements of Cash Flows


(In
Millions of Dollars)





Fiscal
      years endedSeptember
      26, 2009
            
            
            September
      27, 2008
            
            
            September
      29, 2007Cash
      Flows from Operating Activities:Net
      loss
            
            $
            (26.2
            )
            
            $
            (101.1
            )
            
            $
            (116.2
            )Adjustments
      to reconcile net cash from operating activities:Depreciation
      and amortization
            
            
            253.5
            
            
            
            256.8
            
            
            
            220.2Non-cash
      interest expense
            
            
            36.9
            
            
            
            24.6
            
            
            
            7.3Non-cash interest income
            
            
            (17.6)
            
            
            
            —
            
            
            
            —Non-cash
      compensation
            
            
            12.4
            
            
            
            19.6
            
            
            
            19.6Write-off of deferred financing fees
            
            
            0.8
            
            
            
            —
            
            
            
            35.5Non-cash gain on investment in 10 1⁄4% Senior Subordinated
      Notes
            
            
            (25.9
            )
            
            
            —
            
            
            
            —Deferred
      income taxes (benefit)
            
            
            (7.8
            )
            
            
            (52.7
            )
            
            
            (90.4
            )Loss on disposal and impairment of fixed assets
            
            
            7.8
            
            
            
            —
            
            
            
            18.1Minority
      interest
            
            
            —
            
            
            
            —
            
            
            
            (2.7
            )Discontinued
      operations, net of income taxes
            
            
            4.2
            
            
            
            —
            
            
            
            —Other
      non-cash expense
            
            
            (9.1
            )
            
            
            —
            
            
            
            —Changes
      in operating assets and liabilities:Accounts receivable,
      net
            
            
            85.4
            
            
            
            (15.4
            )
            
            
            2.9Inventories
            
            
            122.8
            
            
            
            (75.2
            )
            
            
            17.6Prepaid expenses and other
      assets
            
            
            16.8
            
            
            
            (11.2
            )
            
            
            3.8Accounts payable and other
      liabilities
            
            
            (39.6
            )
            
            
            (35.6
            )
            
            
            21.6Net
      cash provided by operating activities
            
            
            414.4
            
            
            
            9.8
            
            
            
            137.3Cash
      Flows from Investing Activities:Additions
      to property, plant and equipment
            
            
            (194.4
            )
            
            
            (162.4
            )
            
            
            (99.3
            )Proceeds
      from disposal of assets
            
            
            3.6
            
            
            
            83.0
            
            
            
            10.8Investment
      in Berry Plastics Group debt securities
            
            
            (168.8
            )
            
            
            —
            
            
            
            —Acquisitions
      of business, net of cash acquired
            
            
            (4.6
            )
            
            
            (576.2
            )
            
            
            (75.8
            )Net
      cash used for investing activities
            
            
            (364.2
            )
            
            
            (655.6
            )
            
            
            (164.3
            )Cash
      Flows from Financing Activities:Proceeds
      from long-term borrowings
            
            
            4.5
            
            
            
            1,388.5
            
            
            
            1,233.0Transfers
      to parent, net
            
            
            (0.4
            )
            
            
            (0.5
            )
            
            
            (102.5
            )Repayment
      of long-term debt
            
            
            (233.4
            )
            
            
            (543.0
            )
            
            
            (1,161.2
            )Debt
      financing costs
            
            
            (0.4
            )
            
            
            (26.4
            )
            
            
            (9.7
            )Sale
      of interest rate hedges
            
            
            —
            
            
            
            2.4
            
            
            
            —Net
      cash provided by (used for) financing activities
            
            
            (229.7
            )
            
            
            821.0
            
            
            
            (40.4
            )Effect
      of currency translation on cash
            
            
            (0.2
            )
            
            
            (0.1
            )
            
            
            (1.1
            )Net
      increase (decrease) in cash and cash equivalents
            
            
            (179.7
            )
            
            
            175.1
            
            
            
            (68.5
            )Cash
      and cash equivalents at beginning of period
            
            
            189.7
            
            
            
            14.6
            
            
            
            83.1Cash
      and cash equivalents at end of period
            
            $
            10.0
            
            
            $
            189.7
            
            
            $
            14.6





See
notes to consolidated financial statements.


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Berry Plastics Corporation


Notes
to Consolidated Financial Statements


(In
millions of dollars, except as otherwise noted)





1.  Basis of Presentation and Summary of Significant Accounting
Policies





Background





Berry Plastics Corporation
is one of the world’s leading manufacturer and marketers of plastic packaging
products, plastic film products, specialty adhesives and coated
products.  Berry Plastics Corporation’s key principal productsinclude containers, drink cups, bottles, closures and overcaps, tubes and
prescription containers, trash bags, stretch films, plastic sheeting, and tapes
which we sell into a diverse selection of attractive and stable end markets,
including food and beverage, healthcare, personal care, quick service and family
dining restaurants, custom and retail, agricultural, horticultural,
institutional, industrial, construction, aerospace, and automotive.At fiscal year end 2009
and 2008, the Company had over 60 production and manufacturing facilities,
primarily located in the United States.





In
December 2007, Berry Plastics Holding Corporation completed an internal entity
restructuring.  Pursuant to this restructuring, effective December 28,
2007, Berry Plastics Corporation converted to Berry Plastics, LLC and then
merged with and into Berry Plastics Holding Corporation.  In addition,
Berry Plastics Holding Corporation changed its name to Berry Plastics
Corporation (“Berry” or the “Company”).





Basis
of Presentation





Berry is
a wholly-owned subsidiary of Berry Plastics Group, Inc. (“Berry
Group”).  Berry Group is primarily owned by affiliates of Apollo
Management, L.P. and Graham Partners.  Periods presented in this form
10K include fiscal periods ending September
26, 2009 (“fiscal 2009”), September 27, 2008 (“fiscal 2008”) and September 29,
2007 (“fiscal 2007”). Berry, through its wholly-owned subsidiaries
operates in four primary segments:  Rigid Open Top, Rigid Closed Top,
Flexible Films, and Tapes and Coatings.  The Company’s customers are
located principally throughout the United States, without significant
concentration in any one region or with any one customer.  The Company
performs periodic credit evaluations of its customers’ financial condition and
generally does not require collateral.  The Company has evaluated
subsequent events through November 24, 2009, which is the date the financial
statements were issued.





The
Company has recorded expense in our financial statements of $12.4 million, $19.6
million and $19.6 million for the fiscal years ended 2009, 2008 and 2007,
respectively, related to stock compensation of Berry Group, management fees of
$6.4 million, $6.0 million and $5.9 million for the fiscal years ended 2009,
2008 and 2007, respectively, charged by Apollo and other investors to Berry
Group and recorded income taxes to push down the respective amounts that relate
to the consolidated or combined operations of the Company.  See Note
11 for further discussion of related party
transactions.





Consolidation





The
consolidated financial statements include the accounts of Berry Plastics
Corporation and its subsidiaries, all of which are wholly owned. Intercompany
accounts and transactions have been eliminated in consolidation.





Revenue
Recognition





Revenue
from the sales of products is recognized at the time title and risks and rewards
of ownership pass to the customer (either when the products reach the
free-on-board shipping point or destination depending on the contractual terms),
there is persuasive evidence of an arrangement, the sales price is fixed and
determinable and collection is reasonably assured.  Provisions for
certain rebates, sales incentives, trade promotions, coupons, product returns
and discounts to customers are accounted for as reductions in gross sales to
arrive at net sales.  In accordance with the Revenue Recognition
standards of the Accounting Standards Codification (“Codification” or “ASC”),
the Company provides for these items as reductions of revenue at the later of
the date of the sale or the date the incentive is offered.  These
provisions are based on estimates derived from current program requirements and
historical experience.


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Shipping,
handling, purchasing, receiving, inspecting, warehousing, and other costs of
distribution are presented in cost of sales in the statements of
operations.  The Company classifies amounts charged to its customers
for shipping and handling in net sales in its statement of
operations.





Vendor
Rebates, Purchases of Raw Materials and Concentration of Risk





The
Company receives consideration in the form of rebates from certain
vendors.  The Company accrues these as a reduction of inventory cost
as earned under existing programs, and reflects as a reduction of cost of goods
sold at the time that the related underlying inventory is sold to
customers.





The
largest supplier of the Company’s total resin material requirements represented
approximately 27% of purchases in fiscal 2009.  The Company uses
suppliers such as Chevron, DAK Americas,
Dow, Dupont, Eastman Chemical, Exxon Mobil, Flint Hills Resources, Georgia Gulf,
Lyondell/Bassell, Nova, PolyOne Corp., Sunoco, Total, and Westlaketo meet
its resin requirements.





Research
and Development





Research
and development costs are expensed when incurred.  The Company
incurred research and development expenditures of $15.7 million for fiscal 2009,
$13.9 million for fiscal 2008, and $11.2 million for fiscal 2007.





Advertising





Advertising
costs are expensed when incurred and are included in Operating expenses on the
Consolidated Statements of Operations.  The Company incurred
advertising costs of $1.3 million in fiscal 2009, $0.7 million in fiscal 2008
and $1.1 million in fiscal 2007.





Stock-Based
Compensation





The
compensation guidance of the FASB requires that the compensation cost relating
to share-based payment transactions be recognized in financial statements based
on alternative fair value models.  The share-based compensation cost
is measured based on the fair value of the equity or liability instruments
issued.  At fiscal year end 2009, the Company has one share-based
compensation plan, the 2006 Equity Incentive Plan, which is more fully described
in Note 12.  In connection with the merger with Covalence, prior to
the granting of the special one-time dividend discussed in Note 12, the Company
amended the terms of the plan to allow both vested and nonvested option holders
to receive the dividend either immediately (in the case of vested holders) or
after a two-year vesting period (in the case of nonvested
holders).





In December 2008, the
Executive Committee of Berry Group modified the vesting provisions related to
amounts being held in escrow.  This resulted in the immediate vesting
and accelerating the recognition of the remaining unrecorded stock compensation
expense of $11.4 million in selling, general and administrative expenses
recorded in the first fiscal quarter of 2009.  The Company has
continued to make stock option grants under the 2006 Equity Incentive Plan
subsequent to the special one-time dividend.  The Company recognized
$1.0 million in stock compensation expense primarily related to stock option
awards granted after the amendment and special one-time dividend, resulting in
total stock compensation expense of $12.4 million for fiscal
2009.  The Company recorded $19.6 million in stock compensation
expense for each of the fiscal years ended 2008 and 2007.





The
Company utilizes the Black-Scholes option valuation model for estimating the
fair value of the stock options.  The model allows for the use of a
range of assumptions.  Expected volatilities utilized in the
Black-Scholes model are based on implied volatilities from traded stocks of peer
companies. Similarly, the dividend yield is based on historical experience and
the estimate of future dividend yields.  The risk-free interest rate
is derived from the U.S. Treasury yield curve in effect at the time of
grant.  The expected lives of the grants are derived from historical
experience and expected behavior.  The fair value for options granted
have been estimated at the date of grant using a Black-Scholes model, with the
following weighted average assumptions:




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Fiscal
      year2009
            2008
            2007Risk-free
      interest rate
            1.7-2.5%
            2.7-4.2%
            4.5
      – 4.9%Dividend
      yield
            0.0%
            0.0%
            0.0%Volatility
      factor
            .36
      - .37
            .31
      - .34
            .20
      - .45Expected
      option life
            5
      years
            5
      years
            3.73
      – 6.86 years





Foreign
Currency





For the
non-U.S. subsidiaries that account in a functional currency other than U.S.
Dollars, assets and liabilities are translated into U.S. Dollars using
period-end exchange rates.  Sales and expenses are translated at the
average exchange rates in effect during the period.  Foreign currency
translation gains and losses are included as a component of Accumulated other
comprehensive income (loss) within stockholders’ equity.  Gains and
losses resulting from foreign currency transactions, the amounts of which are
not material in any period presented are included in Consolidated Statements of
Operations.





Cash
and Cash Equivalents





All
highly liquid investments purchased with a maturity of three months or less from
the time of purchase are considered to be cash equivalents.





Investment
Policy





All of
our material investments are classified as held-to-maturity. The Company makes
investments in securities for strategic purposes or for long-term returns on
cash.  The Company evaluates the investment guidance of the Financial Accounting
Standard Board ("FASB") in determining how to classify our
securities.  We have the intent and
ability to hold the security to maturity.Held-to-maturity
securities arestated at amortized cost and with any discount being accreted under the
effective interest method to interest income.  The Company has
recorded these investments in Other assets in the Consolidated Balance
Sheet.See Note 11 for further discussion of
investments.





Allowance
for Doubtful Accounts





The
Company’s accounts receivable and related allowance for doubtful accounts are
analyzed in detail on a quarterly basis and all significant customers with
delinquent balances are reviewed to determine future
collectibility.  The determinations are based on legal issues (such as
bankruptcy status), past history, current financial and credit agency reports,
and the experience of the credit representatives.  Reserves are
established in the quarter in which the Company makes the determination that the
account is deemed uncollectible.  The Company maintains additional
reserves based on its historical bad debt experience.  Additionally,
the allowance for doubtful accounts includes a reserve for cash discounts that
are offered to some customers for prompt payment.  The following table
summarizes the activity for the fiscal years 2009, 2008 and 2007 for the
allowance for doubtful accounts:





2009
            2008
            2007Balance
      at beginning of period
            $12.1
            $11.3
            $9.6Acquired
      allowance (Captive and Mac)
            —
            1.0
            —Charged
      to sales deductions, costs and expenses, net
            (3.3)
            0.3
            0.1Deductions
      and currency translation
            0.2
            (0.5)
            1.6Balance
      at end of period
            $9.0
            $12.1
            $11.3





Inventories





Inventories are stated at
the lower of cost or market and are valued using the first-in, first-out
method.  Management periodically reviews inventory balances, using
recent and future expected sales to identify slow-moving and/or obsolete items.
The cost of spare parts inventory is charged to manufacturing overhead expense
when incurred.We evaluate our reserve for inventory
obsolescence on a quarterly basis and review inventory on-hand to determine
future salability.  We base our determinations on the age of the
inventory and the experience of our personnel.  We reserve inventory
that we deem to be not salable in the quarter in which we make the
determination.  We believe, based on past history and
our


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policies
and procedures, that our net inventory is salable.  Our reserve for
inventory obsolescence was $13.1 million and $19.3 million as of fiscal year
2009 and 2008, respectively.





Property,
Plant and Equipment





Property
and equipment are stated at cost.  Depreciation is computed primarily
by the straight-line method over the estimated useful lives of the assets
ranging from 15 to 25 years for buildings and improvements and two to 10 years
for machinery, equipment, and tooling.  Leasehold improvements are
depreciated over the shorter of the useful life of the improvement or the lease
term.  Repairs and maintenance costs are charged to expense as
incurred.  Depreciation expense totaled $158.2 million, $164.1 million
and $142.6 million for fiscal years ended 2009, 2008, and 2007,
respectively.  The Company capitalized interest of $2.4 million, $2.3
million and $1.5 million in fiscal 2009, 2008 and 2007,
respectively.





Long-lived
Assets





Long-lived
assets, including property, plant and equipment and definite lived intangible
assets are reviewed for impairment in accordance with the Property, Plant and
Equipment standard of the ASC whenever facts and circumstances indicate that the
carrying amount may not be recoverable.  Specifically, this process
involves comparing an asset’s carrying value to the estimated undiscounted
future cash flows the asset is expected to generate over its remaining
life.  If this process were to result in the conclusion that the
carrying value of a long-lived asset would not be recoverable, a write-down of
the asset to fair value would be recorded through a charge to
operations.  Fair value is determined based upon discounted cash flows
or appraisals as appropriate.  Long-lived assets that are held for
sale are reported at the lower of the assets’ carrying amount or fair value less
costs related to the assets’ disposition.  In connection with our
facility rationalizations, we recorded impairment charges totaling $7.8 million
and $18.1 million to write-down fixed assets to their net realizable valuables
during fiscal years 2009 and 2007, respectively.  The Company did not
record any impairment charges for fiscal 2008.





Goodwill





The
Company follows the principles provided by the Goodwill and Other Intangibles
standard of the ASC. Goodwill is not amortized but rather tested annually for
impairment. The Company performs their annual impairment test on the first day
of the fourth quarter in each respective fiscal year.  The Company’s
five reporting units are contained within our four operating segments, Rigid
Open Top, Rigid Closed Top, Flexible Films and Tapes and Coatings under the
Segment Reporting standard of the ASC. Based on the fact that each reporting
unit constitutes a business, has discrete financial information with similar
economic characteristics, and the operating results of the component are
regularly reviewed by management, the Company applies the provisions set forth
by the guidance of the Goodwill and Other Intangibles standard of the ASC and
performs the necessary goodwill impairment tests at the reporting unit
level.  We completed the annual impairment test of goodwill and noted
no impairment.


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The
changes in the carrying amount of goodwill by reportable segment are as follows
(in millions):





Rigid
            
            
            Rigid
            
            
            Flexible
            
            
            Tapes
      andOpen
      Top
            
            
            Closed
      Top
            
            
            Films
            
            
            Coatings
            
            
            TotalBalance
      at fiscal year end 2007
            
            $
            646.3
            
            
            $
            456.2
            
            
            $
            23.7
            
            
            $
            5.8
            
            
            $
            1,132.0Goodwill
      from acquisitions
            
            
            —
            
            
            
            317.7
            
            
            
            (0.4
            )
            
            
            —
            
            
            
            317.3Balance
      at fiscal year end 2008
            
            $
            646.3
            
            
            $
            773.9
            
            
            $
            23.3
            
            
            $
            5.8
            
            
            $
            1,449.3Adjustment
      for income taxes
            
            
            —
            
            
            
            —
            
            
            
            (6.5
            )
            
            
            (5.8
            )
            
            
            (12.3
            )Foreign
      currency translation adjustment
            
            
            —
            
            
            
            (3.6
            )
            
            
            —
            
            
            
            —
            
            
            
            (3.6
            )Goodwill
      from divestitures
            
            
            —
            
            
            
            (2.2
            )
            
            
            —
            
            
            
            —
            
            
            
            (2.2
            )Balance
      at fiscal year end 2009
            
            $
            646.3
            
            
            $
            768.1
            
            
            $
            16.8
            
            
            $
            —
            
            
            $
            1,431.2





Deferred
Financing Fees





Deferred
financing fees are being amortized to interest expense using the effective
interest method over the lives of the respective debt agreements.





Intangible
Assets





Customer
relationships are being amortized using an accelerated amortization method which
corresponds with the customer attrition rates used in the initial valuation of
the intangibles over the estimated life of the relationships which range from 11
to 20 years.  Technology intangibles are being amortized using the
straight-line method over the estimated life of the technology which is 11
years.  License intangibles are being amortized using the
straight-line method over the life of the license which is 10
years.  Patent intangibles are being amortized using the straight-line
method over the shorter of the estimated life of the technology or the patent
expiration date ranging from ten to twenty years, with a weighted-average life
of 15 years.  The Company evaluates the remaining useful life of
intangible assets on a periodic basis to determine whether events and
circumstances warrant a revision to the remaining useful
life.  Trademarks that are expected to remain in use, which are
indefinite lived intangible assets, are required to be reviewed for impairment
annually.  We completed the annual impairment test of tradenames and
noted no impairment.





Insurable
Liabilities





The
Company records liabilities for the self-insured portion of workers’
compensation, health, product, general and auto liabilities.  The
determination of these liabilities and related expenses is dependent on claims
experience.  For most of these liabilities, claims incurred but not
yet reported are estimated by utilizing actuarial valuations based upon
historical claims experience.





Income
Taxes





The
Company accounts for income taxes under the asset and liability approach, which
requires the recognition of deferred tax assets and liabilities for the expected
future tax consequence of events that have been recognized in the Company’s
financial statements or income tax returns.  Income taxes are
recognized during the period in which the underlying transactions are
recorded.  Deferred taxes, with the exception of non-deductible
goodwill, are provided for temporary differences between amounts of assets and
liabilities as recorded for financial reporting purposes and such amounts as
measured by tax laws.  If the Company determines that a deferred tax
asset arising from temporary differences is not likely to be utilized, the
Company will establish a valuation allowance against that asset to record it at
its expected realizable value.  The Company recognizes uncertain tax
positions when it is more likely than not that the tax position will be
sustained upon examination by relevant taxing authorities, based on the
technical merits of the position. The amount recognized is measured as the
largest amount of benefit that is greater than 50 percent likely of being
realized upon ultimate settlement.  The Company’s effective tax rate
is dependent on many factors including:  the impact of enacted tax
laws in jurisdictions in which the Company operates; the amount of earnings by
jurisdiction, due to varying tax rates in each country; and the Company’s
ability to utilize foreign tax credits related to foreign taxes paid on foreign
earnings that will be remitted to the U.S.


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Comprehensive
Income (Loss)





Comprehensive
income (loss) is comprised of net income (loss) and other comprehensive income
(losses).  Other comprehensive income (losses) includes unrealized
gains or losses resulting from currency translations of foreign subsidiaries,
changes in the value of our derivative instruments and adjustments to the
pension liability.





Accrued
Rebates





The
Company offers various rebates to customers in exchange for
purchases.  These rebate programs are individually negotiated with
customers and contain a variety of different terms and
conditions.  Certain rebates are calculated as flat percentages of
purchases, while others included tiered volume incentives.  These
rebates may be payable monthly, quarterly, or annually.  The
calculation of the accrued rebate balance involves significant management
estimates, especially where the terms of the rebate involve tiered volume levels
that require estimates of expected annual sales.  These provisions are
based on estimates derived from current program requirements and historical
experience.  The Company uses all available information when
calculating these reserves.  The accrual for customer rebates was
$43.9 million and $51.5 million at the end of fiscal 2009 and 2008, respectively
and is included in Accrued expenses and other current
liabilities.





Pension





Pension
benefit costs include assumptions for the discount rate, retirement age, and
expected return on plan assets.  Retiree medical plan costs include
assumptions for the discount rate, retirement age, and health-care-cost trend
rates.  Periodically, the Company evaluates the discount rate and the
expected return on plan assets in its defined benefit pension and retiree health
benefit plans.  In evaluating these assumptions, the Company considers
many factors, including an evaluation of the discount rates, expected return on
plan assets and the health-care-cost trend rates of other companies; historical
assumptions compared with actual results; an analysis of current market
conditions and asset allocations; and the views of advisers.  As
further discussed in Note 9, the Company adopted guidance of the Compensation
standard of the ASC effective September 29, 2007.


Use
of Estimates





The
preparation of the financial statements in conformity with U.S. generally
accepted accounting principles requires management to make extensive use of
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities and the reported
amounts of sales and expenses.  Significant estimates in these
financial statements include restructuring charges and credits, allowances for
doubtful accounts receivable, estimates of future cash flows associated with
long-lived assets, useful lives for depreciation and amortization, loss
contingencies and net realizable value of inventories, revenue credits, vendor
rebates, income taxes and tax valuation reserves and the determination of
discount and other rate assumptions for pension and postretirement employee
benefit expenses.  Actual results could differ materially from these
estimates.  Changes in estimates are recorded in results of operations
in the period that the event or circumstances giving rise to such changes
occur.





Recently
Issued Accounting Pronouncements





In
June 2009, the FASB issued authoritative guidance that establishes the FASB
Codification as the single source of authoritative United States accounting and
reporting standards applicable for all non-government entities, with the
exception of guidance promulgated by the SEC and its staff. The Codification,
which changes the referencing of financial standards, is effective for interim
or annual financial periods ending after September 15, 2009. We implemented
the guidance effective in fiscal 2009.





In
December 2007, the FASB issued authoritative guidance that establishes the
principles and requirements for how an acquirer (i) recognizes and measures
in its financial statements the identifiable assets acquired, the liabilities
assumed, and any noncontrolling interest in the acquiree; (ii) recognizes
and measures the goodwill acquired in the business combination or a gain from a
bargain purchase; and (iii) determines what information to disclose to
enable users of the financial statements to evaluate the nature and financial
effects of the business combination. This guidance makes significant changes to
existing accounting practices for acquisitions, including the requirement to
expense transaction costs and to


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reflect
the fair value of contingent purchase price adjustments at the date of
acquisition. In April 2009, the FASB issued an amendment to amend and
clarify the guidance on business combinations to require that an acquirer
recognize at fair value, at the acquisition date, an asset acquired or a
liability assumed in a business combination that arises from a contingency if
the acquisition-date fair value of that asset or liability can be determined
during the measurement period. If the acquisition-date fair value of such an
asset acquired or liability assumed cannot be determined, the acquirer should
apply the provisions of the guidance on business combinations to determine
whether the contingency should be recognized at the acquisition date or after
it. The guidance is effective for business combinations for which the
acquisition date is after the beginning of the first annual reporting period
beginning after December 15, 2008, which is effective for us in fiscal
2010. For any acquisitions completed after fiscal 2009, we expect the adoption
of the guidance will have an impact on our consolidated financial statements;
however, the magnitude of the impact will depend upon the nature, terms and size
of the acquisitions we consummate.





In
December 2007, the FASB issued authoritative guidance that establishes
accounting and reporting standards that require (i) noncontrolling
interests to be reported as a component of equity; (ii) changes in a
parent's ownership interest while the parent retains its controlling interest to
be accounted for as equity transactions; and (iii) any retained
noncontrolling equity investment upon the deconsolidation of a subsidiary to be
initially measured at fair value.  The guidance is to be applied
prospectively at the beginning of the first annual reporting period on or after
December 15, 2008. We will implement the new standard effective in fiscal
2010. We do not believe that the adoption of the guidance will have a material
effect on our consolidated financial statements.





In March
2008, the FASB issued authoritative guidance for disclosures about derivative
instruments and hedging activities. The guidance is intended to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity's results of operations. The Company adopted the disclosure
provisions of the guidance as of December 27, 2008.  The adoption
did not have an impact on the Company's financial position, results of
operations or cash flows. The disclosure provision is included in Note
4.





In
May 2009, the FASB issued authoritative guidance that was effective
June 15, 2009 and establishes general standards of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. This guidance is
currently effective for us and the adoption of the guidance did not have a
material effect on our consolidated financial statements. We evaluated
subsequent events through November 24, 2009, the date our financial
statements were issued.





2. Acquisitions and Divestitures





The
Company maintains a selective and disciplined acquisition strategy, which is
focused on improving our long term financial performance, enhancing our market
positions and expanding our product lines or, in some cases, providing us with a
new or complementary product line.  Most businesses we have acquired
had profit margins that are lower than that of our existing business, which
resulted in a temporary decrease in our margins.  The Company has
historically achieved significant reductions in manufacturing and overhead costs
of acquired companies by introducing advanced manufacturing processes, exiting
low-margin businesses or product lines, reducing headcount, rationalizing
facilities and machinery, applying best practices and capitalizing on economies
of scale.  In connection with our acquisitions, we have in the past
and may in the future incur charges related to these reductions and
rationalizations.





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





Acquisition
of Minority Interest of Berry and Covalence





On April
3, 2007, shares of old Berry Plastics Group, Inc. and CSM Holding were exchanged
for shares in Group.  The minority shareholders and management held
ownership interests of 28% and 5% for old Berry Plastics Group, Inc
and


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CSM
Holding, respectively. The acquisition of these ownership interests was
accounted for under the purchase method of accounting and pushed-down to the
Company as disclosed in detail in the fiscal 2008 Form
10k.





Rollpak
Acquisition Corp.





On April
11, 2007, the Company completed its acquisition of 100% of the outstanding
common stock of Rollpak Acquisition Corporation, which is the sole stockholder
of Rollpak.  Rollpak is a flexible film manufacturer located in
Goshen, Indiana with annual net sales of approximately $50.0 million in calendar
2006 sales.  The purchase price was funded utilizing cash on
hand.  The Rollpak acquisition has been accounted for under the
purchase method of accounting,





Sale
of UK Operations





On April
10, 2007, the Company sold its wholly owned subsidiary, Berry Plastics UK Ltd.,
to Plasticum Group N.V. for approximately $10.0 million.  At the
time of the sale, the annual net sales of this business were less than
$9.0 million.





MAC
Closures, Inc.





On
December 19, 2007, the Company acquired 100% of the outstanding common stock of
MAC, a plastic cap and closure manufacturer located in Waterloo, Quebec for
approximately CN$72.0 million.  MAC is a fully integrated manufacturer
of injection molded plastic caps and closures primarily serving the
pharmaceutical, nutraceutical, personal care, amenity, and household and
industrial chemical industries with 2007 calendar year sales of $37.1
million.  MAC manufactures stock and custom products for U.S. and
Canadian based private and national brand owners, distributors and other
packaging suppliers and is included in our closed top segment.  The
purchase price was funded utilizing cash on hand from the sale-leaseback
transaction discussed elsewhere in this Form 10-K.  The MAC
acquisition has been accounted for using the purchase method of accounting, and
accordingly, the purchase price has been allocated to working capital and fixed
assets with any excess allocated to goodwill.  The Company established
opening balance sheet reserves of $1.2 million related to the shutdown of the
Oakville, Ontario facility and related severance costs.  This shutdown
was completed in fiscal 2009.  Pro forma results have not been
presented, as they do not differ materially from reported historical
results.





Captive
Holdings, LLC





On
February 5, 2008, the Company completed its purchase of the outstanding capital
stock of Captive Holdings, Inc., the parent company of
Captive.  Pursuant to a Stock Purchase Agreement dated December 21,
2007 and amended on January 25, 2008, the aggregate purchase price was
approximately $500.0 million, subject to certain post-closing upward or downward
adjustments.  Captive manufactures blow-molded bottles and
injection-molded closures for the food, healthcare, spirits and personal care
end markets and is included in the Company’s Rigid Closed Top
segment.  To finance the purchase, Berry used the proceeds from a
$520.0 million bridge loan facility which was subsequently retired with the
issuance of the Senior Secured First Priority Notes.  A portion of the
goodwill is deductible for tax purposes.  The following table
summarizes the final allocation of purchase price and the fair values of the
assets acquired and liabilities assumed at the date of acquisition:





Working
      capital
            
            $
            39.5Property plant and equipment
            
            
            73.1Intangible assets
            
            
            159.0Goodwill
            
            
            281.4Long-term
      liabilities
            
            
            (48.5
            )Net
      assets acquired
            
            $
            504.5





The
impact of recording inventory at fair value resulted in the Company recording a
charge of $4.5 million in cost of goods sold in fiscal 2008.  The
Company established opening balance sheet reserves associated with the Captive
Plastics acquisition of $2.4 million for the facility shut down of which $1.5
million is expected to be paid in future periods.





Acquisition
of Assets of Erie County Plastics Corporation





In
November 2008, the Company was the successful bidder to acquire certain assets
of Erie County Plastics Corporation, a


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custom
injection molder of plastics packaging and components for $4.6
million.  Erie Plastics previously filed for bankruptcy protection on
September 29, 2008.  The Company funded the acquisition of these
assets with cash from operations.





Sale
of Capsol Berry Plastics S.p.a.





In March
2009, the Company sold Capsol Berry Plastics S.p.a.  This business
generated annual net sales of approximately $17.0 million and was included in
our Rigid Closed Top segment.  The sale resulted in a net loss of $4.2
million, net of tax, which is included in Discontinued
operations.  The impact on other periods presented
were not material.








3.  Long-Term Debt





Long-term
debt consists of the following as of fiscal year end 2009 and 2008:





Maturity
      Date
            
            2009
            
            
            2008Term
      loan
            April
      3, 2015
            
            $
            1,173.0
            
            
            $
            1,185.0Revolving
      line of credit
            April
      3, 2013
            
            
            69.0
            
            
            
            257.1First
      Priority Senior Secured Floating Rate Notes
            February
      15, 2015
            
            
            680.6
            
            
            
            680.6Debt
      discount on First Priority Notes
            
            
            
            (15.1
            )
            
            
            (18.0
            )Second
      Priority Senior Secured Fixed Rate Notes
            September
      15, 2014
            
            
            525.0
            
            
            
            525.0Second
      Priority Senior Secured Floating Rate Notes
            September
      15, 2014
            
            
            225.0
            
            
            
            225.011%
      Senior Subordinated Notes
            September
      15, 2016
            
            
            454.6
            
            
            
            441.210
      1⁄4% Senior Subordinated Notes
            March
      1, 2016
            
            
            215.3
            
            
            
            265.0Capital
      leases and other
            Various
            
            
            32.3
            
            
            
            38.73,359.7
            
            
            
            3,599.6Less
      current portion of long-term debt
            
            
            
            (17.5
            )
            
            
            (21.4
            )$
            3,342.2
            
            
            $
            3,578.2





Senior
Secured Credit Facility





In
connection with the merger with Covalence, the Company entered into
senior secured credit facilities that include a term loan in the principal
amount of $1,200.0 million term loan and a revolving credit facility (“Credit
Facility”) which provides $381.7 million asset based revolving line of credit,
net of defaulting lenders.The Credit Facility provides
borrowing availability equal to the lesser of (a) $381.7 million, net of
defaulting lenders or (b) the borrowing base, which is a function, among other
things, of the Company’s accounts receivable and inventory.  The term
loan matures on April 3, 2015 and the revolving credit facility matures on April
3, 2013.  The Company recorded a $37.1 million loss in connection with
this new credit facility, when the existing Covalence debt was
exchanged.  This loss is included in Other expense on the our
Consolidated Statement of Operations for fiscal 2007.





The
borrowings under the senior secured credit facilities bear interest at a rate
equal to an applicable margin plus, as determined at the Company’s option,
either (a) a base rate determined by reference to the higher of (1) the prime
rate of Credit Suisse, Cayman Islands Branch, as administrative agent, in the
case of the term loan facility or Bank of America, N.A., as administrative
agent, in the case of the revolving credit facility and (2) the U.S. federal
funds rate plus 1/2 of 1% or (b) LIBOR (0.28% and 0.52% for the term loan and
the revolving line of credit, respectively, at fiscal year end 2009) determined
by reference to the costs of funds for eurodollar deposits in dollars in the
London interbank market for the interest period relevant to such borrowing Bank
Compliance for certain additional costs.  The applicable margin for
LIBOR rate borrowings under the revolving credit facility ranges from 1.00% to
1.75% and for the term loan is 2.00%.  The initial applicable margin
for base rate borrowings under the revolving credit facility is 0% and under the
term loan is 1.00%.





The term
loan facility requires minimum quarterly principal payments of $3.0 million for
the first eight years, which commenced in June 2007, with the remaining amount
payable on April 3, 2015. In addition, the Company must prepay the outstanding
term loan, subject to certain exceptions, with (1) beginning with the Company’s
first fiscal year after the


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closing,
50% (which percentage is subject to a minimum of 0% upon the achievement of
certain leverage ratios) of excess cash flow (as defined in the credit
agreement); and (2) 100% of the net cash proceeds of all non-ordinary course
asset sales and casualty and condemnation events, if the Company does not
reinvest or commit to reinvest those proceeds in assets to be used in its
business or to make certain other permitted investments within 15 months,
subject to certain limitations.





In
addition to paying interest on outstanding principal under the senior secured
credit facilities, the Company is required to pay a commitment fee to the
lenders under the revolving credit facilities in respect of the unutilized
commitments thereunder at a rate equal to 0.25% to 0.35% per annum depending on
the average daily available unused borrowing capacity. The Company also pays a
customary letter of credit fee, including a fronting fee of 0.125% per annum of
the stated amount of each outstanding letter of credit, and customary agency
fees.





The
Company may voluntarily repay outstanding loans under the senior secured credit
facilities at any time without premium or penalty, other than customary
“breakage” costs with respect to eurodollar loans.  The senior secured
credit facilities contain various restrictive covenants that, among other things
and subject to specified exceptions, prohibit the Company from prepaying other
indebtedness, and restrict its ability to incur indebtedness or liens, make
investments or declare or pay any dividends.  All obligations under
the senior secured credit facilities are unconditionally guaranteed by Berry
Group and, subject to certain exceptions, each of the Company’s existing and
future direct and indirect domestic subsidiaries. The guarantees of those
obligations are secured by substantially all of the Company’s assets as well as
those of each domestic subsidiary guarantor.





The
Company’s fixed charge coverage ratio, as defined in the revolving credit
facility, is calculated based on a numerator consisting of adjusted EBITDA less
pro forma adjustments, income taxes paid in cash and capital expenditures, and a
denominator consisting of scheduled principal payments in respect of
indebtedness for borrowed money, interest expense and certain
distributions.  We are obligated to sustain a minimum fixed charge
coverage ratio of 1.0 to 1.0 under the revolving credit facility at any time
when the aggregate unused capacity under the revolving credit facility is less
than 10% of the lesser of the revolving credit facility commitments and the
borrowing base (and for 10 business days following the date upon which
availability exceeds such threshold) or during the continuation of an event of
default.  At the end of fiscal 2009, the Company had unused borrowing
capacity of $279.0 million under the revolving credit facility subject to a
borrowing base and thus was not subject to the minimum fixed charge coverage
ratio covenant.  The fixed charge ratio was 1.0 to 1.0, at the end of
fiscal 2009.





Despite
not having financial maintenance covenants, our debt agreements contain certain
negative covenants.  The failure to comply with these negative
covenants could restrict our ability to incur additional indebtedness, effect
acquisitions, enter into certain significant business combinations, make
distributions or redeem indebtedness.  The term loan facility contains
a negative covenant first lien secured leverage ratio covenant of 4.0 to 1.0 on
a pro forma basis for a proposed transaction, such as an acquisition or
incurrence of additional first lien debt.  Our first lien secured
leverage ratio was 3.7 to 1.0 at the end of fiscal 2009.





At fiscal
year end 2009, there was $69.0 million outstanding on the revolving line of
credit and $33.7 million in letters of credit outstanding.  At fiscal
year end 2009, the Company had unused borrowing capacity of $279.0 million (net
of defaulting lenders) under the revolving line of credit subject to the
solvency of the Company’s lenders to fund their obligations and the Company’s
borrowing base calculations.





Senior
Secured First Priority Notes





On April
21, 2008 the Company completed a private placement of $680.6 million, aggregate
principal amount of senior secured first priority notes which mature on February
15, 2015 (“First Priority Notes”).  The Company received gross
proceeds of $661.4 million, before expenses, and repaid the outstanding
borrowings under the senior secured bridge loan that was used to finance and pay
costs related to the Company’s acquisition of Captive and to repay amounts
outstanding under the Company’s Credit Facility as well as to pay fees and
expenses related to the offering.   Interest on the First
Priority Notes accrues at a rate per annum, reset quarterly, equal to LIBOR
(0.28% at fiscal year end 2009) plus 4.75%. Interest on these notes are payable
quarterly in arrears on January 15, April 15, July 15 and October 15 of each
year, which commenced July 15, 2008.  The First Priority Notes are
guaranteed on a senior secured basis by all of the Company’s existing and future
domestic subsidiaries, subject to certain exceptions and will include all of the
Company’s subsidiaries that guarantee the Company’s obligations under its Credit
Facility.  The Senior Secured First Priority Notes


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and the
guarantees are secured on a first-priority basis by a lien on the assets that
secure the Company’s obligations under its senior secured credit facilities,
subject to certain exceptions.  The Company was in compliance with all
covenants at fiscal year end 2009.





Second
Priority Senior Secured Notes





On
September 20, 2006, the Company issued $750.0 million of second priority senior
secured notes (“Second Priority Notes”) comprised of (1) $525.0 million
aggregate principal amount of 87⁄8%second
priority fixed rate notes (“Fixed Rate Notes”) and (2) $225.0 million aggregate
principal amount of second priority senior secured floating rate notes
(“Floating Rate Notes”).  The Second Priority Notes mature on
September 15, 2014.  Interest on the Fixed Rate Notes is due
semi-annually on March 15 and September 15. The Floating Rate Notes bear
interest at a rate of LIBOR (0.28% at end of fiscal 2009) plus 3.875% per annum,
which resets quarterly.  Interest on the Floating Rate Notes is
payable quarterly on March 15, June 15, September 15 and
December 15 of each year.





The
Second Priority Notes are secured by a second priority security interest in the
collateral granted to the collateral agent under the Credit Facility for the
benefit of the holders and other future parity lien debt that may be issued
pursuant to the terms of the indenture.  These liens will be junior in
priority to the liens on the same collateral securing the Credit Facility and to
all other permitted prior liens.  The Second Priority Notes are
guaranteed, jointly and severally, on a second priority senior secured basis, by
each domestic subsidiary that guarantees the Credit Facility.  The
Second Priority Notes contain customary covenants that, among other things,
restrict, subject to certain exceptions, our ability, and the ability of
subsidiaries, to incur indebtedness, sell assets, make investments, engage in
acquisitions, mergers or consolidations and make dividend and other restricted
payments.





On or
after September 15, 2010 and 2008, the Company may redeem some or all of the
Fixed Rate Notes and Floating Rate Notes, respectively, at specified redemption
prices.  If a change of control occurs, the Company must give holders
of the Second Priority Notes an opportunity to sell their notes at a purchase
price of 101% of the principal amount plus accrued and unpaid
interest.  The Company was in compliance with all covenants at fiscal
year end 2009.





11%
Senior Subordinated Notes





On
September 20, 2006, the Company issued $425.0 million in aggregate
principal amount of 11% Senior Subordinated Notes to Goldman, Sachs and Co. in a
private placement that is exempt from registration under the Securities
Act.  The 11% Senior Subordinated Notes are unsecured, senior
subordinated obligations and are guaranteed on an unsecured, senior subordinated
basis by each of our subsidiaries that guarantee the Credit Facility and the
Second Priority Notes.  The 11% Senior Subordinated Notes mature in
2016 and bear interest at a rate of 11% per annum.  Such interest is
payable quarterly in cash; provided, however, that on any quarterly interest
payment date on or prior to the third anniversary of the issuance, the Company
can satisfy up to 3% of the interest payable on such date by capitalizing such
interest and adding it to the outstanding principal amount of the 11% Senior
Subordinated Notes.  The Company issued an additional $13.4 million,
$13.0 million and $3.2 million aggregate principal amount of outstanding notes
in fiscal 2009, 2008 and 2007, respectively, in satisfaction of its interest
obligations.





The 11%
Senior Subordinated Notes may be redeemed at the Company’s option under
circumstances and at redemption prices set forth in the
indenture.  Upon the occurrence of a change of control, the Company is
required to offer to repurchase all of the 11% Senior Subordinated
Notes.  The indenture sets forth covenants and events of default that
are substantially similar to those set forth in the indenture governing the
Second Priority Notes.  The 11% Senior Subordinated Notes contain
additional affirmative covenants and certain customary representations,
warranties and conditions.  The Company was in compliance with all
covenants at fiscal year end 2009.





10
1⁄4% Senior Subordinated Notes





In
connection with Apollo’s acquisition of Covalence, Covalence issued $265.0
million of 10 1⁄4% Senior Subordinated Notes due March 1, 2016.  The
notes are senior subordinated obligations of the Company and rank junior to all
other senior indebtedness that does not contain similar subordination
provisions.  No principal payments are required with


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respect
to the 10 1⁄4% Senior Subordinated Notes prior to maturity.  Interest on
the 10 1⁄4% Senior Subordinated Notes is due semi-annually on March 1 and
September 1.





In fiscal
2009, BP Parallel LLC, a non-guarantor subsidiary of the Company, purchased
$49.7 million of 10 1⁄4% Senior Subordinated Notes for $24.5 million in cash, plus
accrued interest.  The repurchase resulted in a net gain of $25.1
million, which is in Other income in our Consolidated Statements of
Operations.  The Company funded the purchases with cash on
hand.





The
indenture relating to the notes contain a number of covenants that, among other
things and subject to certain exceptions, restrict the Company’s ability and the
ability of its restricted subsidiaries to incur indebtedness or issue
disqualified stock or preferred stock, pay dividends or redeem or repurchase
stock, make certain types of investments, sell assets, incur certain liens,
restrict dividends or other payments from subsidiaries, enter into transactions
with affiliates and consolidate, merge or sell all or substantially all of the
Company’s assets.  The Company was in compliance with all covenants
at fiscal year end
2009.





Future
maturities of long-term debt as of fiscal year end 2009 are as
follows:





2010
            
            $
            17.52011
            
            
            16.82012
            
            
            16.72013
            
            
            86.12014
            
            
            766.7Thereafter
            
            
            2,471.0$
            3,374.8





Interest
paid was $236.3 million in fiscal 2009, $231.7 million in fiscal 2008, and
$223.8 million in fiscal 2007.





4. Financial Instruments and Fair Value Measurements





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





Interest
rate swaps are entered into to manage interest rate risk associated with the
Company’s floating-rate borrowings.  Forward contracts on plastic
resin, the Company’s primary raw material, are entered into to manage the price
risk associated with forecasted purchases of materials used in the Company’s
manufacturing process.


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Cash Flow Hedging
Strategy


For
derivative instruments that are designated and qualify as cash flow hedges, the
effective portion of the gain or loss on the derivative instrument is reported
as a component of Accumulated other comprehensive loss and reclassified into
earnings in the same line item associated with the forecasted transaction and in
the same line item associated with the transaction and in the same period or
periods during which the hedged transaction affects earnings.  The
Company’s forward derivative agreements related to resin contracts are currently
immaterial.





In August
2007, the Company entered into two separate interest rate swap transactions to
protect $600.0 million of the outstanding variable rate term loan debt from
future interest rate volatility.  The swap agreements became effective
in November 2007.  The first agreement had a notional amount of $300.0
million and became effective November 5, 2007 and swaps three month variable
LIBOR contracts for a fixed two year rate of 4.875% and expired on November 5,
2009.  The second agreement had a notional amount of $300.0 million
and became effective November 5, 2007 and swaps three month variable LIBOR
contracts for a fixed three year rate of 4.920% and expires on November 5,
2010.  The counterparty to these agreements is a global financial
institution.





On
January 22, 2008, the Company entered into an interest rate swap transaction to
protect $300.0 million of the outstanding variable rate term loan debt from
future interest rate volatility.  The swap agreement became effective
February 5, 2008.  The swap agreement had a notional amount of $300.0
million and swaped three month variable LIBOR contracts for a fixed three year
rate of 2.962%.  On April 23, 2008, the Company elected to settle this
derivative instrument and received $2.4 million on April 25, 2008 as a result of
this settlement.  The offset is included in Accumulated other
comprehensive loss and is being amortized to Interest expense through February
5, 2011, the original term of the swap agreement.





The
Company’s term loan gives the option to elect different interest rate reset
options.  On November 5, 2008, the Company began and continues to
utilize 1-month LIBOR contracts for the underlying senior secured credit
facility.  The Company’s change in interest rate selection to this
alternative rate has resulted in the Company losing hedge accounting on both of
the interest rate swaps entered into in August 2007.  The Company has
recorded all subsequent changes in fair value from November 5, 2008 to fiscal
year end 2009 in the statement of operations and is amortizing the previously
recorded unrealized loss in Accumulated other comprehensive loss to Interest
expense through the end of the respective swap agreement.





As
discussed above, the Company entered into three interest rate swap transactions
in 2007 and 2008, and initially designated these hedges as cash flow hedges
under guidance of the Derivatives and Hedging standard of the
ASC.  The Company settled one of these instruments in April 2008 and
is amortizing the remaining balance from Accumulated other comprehensive loss to
Interest expense.  The remaining two hedges were accounted as cash
flow hedges through November 5, 2008, at which time the Company determined the
swaps no longer qualified as a cash flow hedge.  The balance in
Accumulated other comprehensive loss is being amortized to Interest expense and
the future changes in the derivative value are being recorded in Other
income.





Liability
      DerivativesDerivatives
      not designated as hedging instruments under Statement 133
            Balance
      Sheet Location
            
            2009
            
            
            2008Interest
      rate swaps
            Other
      LT liabilities
            
            $
            13.5
            
            
            $
            15.0Accrued
      expense and other current liabilities
            
            
            1.4
            
            
            
            ―$
            14.9
            
            
            $
            15.0





The
effect of the derivative instruments on the Consolidated Statements of
Operations for the year ended 2009, are as follows:




Derivatives
      not designated as hedging instruments under Statement 133
            Income
      Statement Location
            
            2009Interest
      rate swaps
            Other
      income
            
            $
            (5.7
            )Interest
      expense
            
            $
            12.9








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Effective
September 28, 2008, the Company adopted the fair value disclosure of financial
assets and nonfinancial liabilities that are recognized or disclosed at fair
value in the financial statements on a nonrecurring basis.  The
Financial Instruments section of the ASC permits an entity to measure certain
financial assets and financial liabilities at fair value that were not
previously required to be measured at fair value.  We have not elected
to measure any financial assets or financial liabilities at fair value that were
not previously required to be measured at fair value.





The Fair
Value Measurements and Disclosures section of the Codification defines fair
value as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date, and establishes a framework for measuring fair
value.  This section also establishes a three-level hierarchy (Level
1, 2 or 3) for fair value measurements based upon the observability of inputs to
the valuation of an asset or liability as of the measurement
date.  This section also requires the consideration of the
counterparty’s or the Company’s nonperformance risk when assessing fair
value.





The
Company's interest rate swap liabilities fair value was determined using
Level 2 inputs as other significant observable inputs were
available.





The
Company’s financial instruments consist primarily of cash and cash equivalents,
investments, long-term debt, interest rate swap agreements and capital lease
obligations.  The fair value of our investments exceeded book
value at fiscal year end 2009, by $96.6 million.  The following
table summarizes our long-term indebtedness for which the book value was in
excess of the fair value:





2009
            
            2008Term
      loan
            $
      134.9
            
            $
      201.6First
      Priority Senior Secured Floating Rate Notes
            49.3
            
            68.1Second
      Priority Senior Secured Fixed Rate Notes
            28.9
            
            115.5Second
      Priority Senior Secured Floating Rate Notes
            54.0
            
            69.811%
      Senior Subordinated Notes
            63.6
            
            119.110
      1⁄4% Senior Subordinated Notes
            30.1
            
            84.8





5.  Goodwill, Intangible Assets and Deferred
Costs





The
following table sets forth the gross carrying amount and accumulated
amortization of the Company’s goodwill, intangible assets and deferred costs as
of the fiscal year end 2009 and 2008:





2009
            
            2008
            Amortization
      PeriodDeferred financing fees
            $    68.8
            
            $    69.3
            Respective
      debtAccumulated amortization
            (23.9)
            
            (15.5)Deferred financing fees, net
            44.9
            
            53.8Goodwill
            1,431.2
            
            1,449.3
            Indefinite
      livedCustomer relationships
            1,031.5
            
            1,033.0
            11
      – 20 yearsTrademarks
            265.0
            
            265.2
            Indefinite
      livedOther intangibles
            53.4
            
            53.3
            10-20
      yearsAccumulated amortization
            (287.4)
            
            (192.4)Intangible assets, net
            1,062.5
            
            1,159.1Total
      Goodwill, Intangible Assets and Deferred Costs
            $2,538.6
            
            $2,662.2





Future
amortization expense for definite lived intangibles at fiscal year end 2009 for
the next five fiscal years is $90.7 million, $85.0 million, $80.0 million, $75.1
million and $70.7 million each year for fiscal years ending 2010, 2011,
2012,


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2013, and
2014, respectively.  Recognized amortization expense totaled $95.3
million, $92.7 million and $77.6 million in fiscal years ended 2009, 2008 and
2007.





6.  Lease and Other Commitments and
      Contingencies





The
Company leases certain property, plant and equipment under long-term lease
agreements.  Property, plant and equipment under capital leases are
reflected on the Company’s balance sheet as owned.  The Company did
not enter into any new capital leases during fiscal 2009 and entered into new
capital lease obligations totaling $28.9 million and $3.7 million during fiscal
2008 and 2007, respectively, with various lease expiration dates through
2015.  Assets under operating leases are not recorded on the Company’s
balance sheet.  Operating leases expire at various dates in the future
with certain leases containing renewal options.  The Company had
minimum lease payments or contingent rentals of approximately $8.2 million and
asset retirement obligations of $7.2 million at fiscal year end
2009.  The Company had minimum lease payments or contingent rentals of
approximately $7.5 million and asset retirement obligations of $6.7 million at
fiscal year end 2008.  Total rental expense from operating leases was
$56.4 million, $58.3 million and $44.2 million for fiscal years ended 2009, 2008
and 2007, respectively.





Future
minimum lease payments for capital leases and
noncancellable operating leases with initial terms in excess of one year as of
fiscal year end 2009, are as follows:





Capital
      Leases
            
            
            Operating
      Leases2010
            
            $
            7.3
            
            
            $
            47.02011
            
            
            6.1
            
            
            
            43.62012
            
            
            5.8
            
            
            
            36.42013
            
            
            5.9
            
            
            
            28.02014
            
            
            5.1
            
            
            
            20.3Thereafter
            
            
            6.8
            
            
            
            112.437.0
            
            
            $
            287.7Less:  amount
      representing interest
            
            
            (8.4
            )Present
      value of net minimum lease payments
            
            $
            28.6





On
December 19, 2007, the Company entered into a sale-leaseback transaction
pursuant to which it sold its manufacturing facilities located in Baltimore,
Maryland; Evansville, Indiana; and Lawrence, Kansas. The Company received
proceeds of $83.0 million and used these proceeds to repay non-recourse debt on
its Evansville, Indiana facility of $7.9 million and transaction costs of $0.9
million. This resulted in the Company receiving net proceeds of $74.2 million
which were utilized to fund the acquisition of MAC Closures, Inc. The
sale-leaseback transaction resulted in the Company realizing a deferred gain of
$41.8 million which will be offset against the future lease payments over the
life of the respective leases.





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, the Company believes that any ultimate liability would not be
material to its financial position, results of operations or cash
flows.  The Company has various purchase commitments for raw
materials, supplies and property and equipment incidental to the ordinary
conduct of business.


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7.  Accrued Expenses and Other Current
Liabilities





The
following table sets forth the totals included in Accrued expenses and other
current liabilities as of fiscal year end 2009 and 2008.





2009
            
            2008Employee compensation, payroll and other taxes
            $    80.1
            
            $    62.3Interest
            17.7
            
            27.8Restructuring
            2.8
            
            4.1Rebates
            43.9
            
            51.5Other
            48.4
            
            60.9$192.9
            
            $206.6





8.Income Taxes





The
Company is being taxed at the U.S. corporate level as a C-Corporation and has
provided U.S. federal and state income taxes.  The Company’s effective
tax rate is dependent on many factors including:  the impact of
enacted tax laws in jurisdictions in which the Company operates; the amount of
earnings by jurisdiction, due to varying tax rates in each country; and the
Company’s ability to utilize foreign tax credits related to foreign taxes paid
on foreign earnings that have been included in U.S. taxable income (loss) under
the Subpart F rules.





Significant
components of income tax benefit for the fiscal years ended 2009, 2008 and 2007
are as follows:





2009
            
            2008
            
            2007CurrentUnited
      StatesFederal
            $
      —
            
            $
      —
            
            $
      —State
            1.4
            
            0.9
            
            0.7Non-U.S.
            0.1
            
            2.6
            
            1.0Current
      income tax provision
            1.5
            
            3.5
            
            1.7Deferred:United
      StatesFederal
            (6.5)
            
            (44.3)
            
            (70.8)State
            (0.7)
            
            (2.9)
            
            (19.8)Non-U.S.
            (0.6)
            
            (5.5)
            
            0.3Deferred
      income tax benefit
            (7.8)
            
            (52.7)
            
            (90.3)Benefit
      for income taxes
            $(6.3)
            
            $(49.2)
            
            $(88.6)





U.S. loss
from continuing operations before income taxes was $(15.0) million, $(139.9)
million and $(204.6)million for the fiscal years ended 2009, 2008 and 2007, respectively.Non-U.S.
loss from continuing operations before income taxes was $(13.3) million, $(10.4)
million and $(2.9)
million for the fiscal years ended 2009, 2008 and 2007,
respectively.





The
reconciliation between U.S. federal income taxes at the statutory rate and the
Company’s benefit for income taxes on continuing operations for the fiscal years
ended 2009, 2008, and 2007 are as follows:




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2009
            
            2008
            
            2007U.S.
      Federal income tax benefit at the statutory rate
            $(9.9)
            
            $(52.6)
            
            $(72.6)Adjustments
      to reconcile to the income tax
              provision:U.S.
      state income tax benefit
            (1.0)
            
            (3.3)
            
            (10.4)Permanent
      differences
            0.2
            
            0.6
            
            0.5Changes
      in State effective tax rate
            —
            
            —
            
            (10.9)Changes
      in Valuation Allowance – Foreign
            3.2
            
            2.8
            
            2.3Rate
      differences between U.S. and Foreign
            1.2
            
            0.9
            
            (0.4)Sub
      F income
            —
            
            2.8
            
            —Other
            —
            
            (0.4)
            
            2.9Benefit
      for income taxes
            $(6.3)
            
            $(49.2)
            
            $(88.6)





Deferred
income taxes result from temporary differences between the amount of assets and
liabilities recognized for financial reporting and tax purposes.  The
components of the net deferred income tax liability at fiscal year end 2009 and
2008 are as follows:





2009
            
            2008Deferred
      tax assets:Allowance
      for doubtful accounts
            $  3.1
            
            $  2.0Deferred
      gain on sale-leaseback
            15.4
            
            13.9Accrued
      liabilities and reserves
            42.8
            
            31.7Inventories
            5.9
            
            6.8Net
      operating loss carryforward
            195.5
            
            183.3Alternative
      minimum tax (AMT) credit carryforward
            7.4
            
            7.4Others
            3.6
            
            13.8Total
      deferred tax assets
            273.7
            
            258.9Valuation
      allowance
            (8.2)
            
            (5.0)Total
      deferred taxes, net of valuation allowance
            265.5
            
            253.9Deferred
      tax liabilities:Property
      and equipment
            85.4
            
            76.3Intangible
      assets
            323.8
            
            351.4Debt
      extinguishment
            7.2
            
            —Others
            —
            
            3.1Total
      deferred tax liabilities
            416.4
            
            430.9Net
      deferred tax liability
            $  (150.9)
            
            $  (177.0)





As of
fiscal year end 2009, the Company had foreign net operating loss carryforwards
of $42.0 million.  In the U.S. the Company had approximately $485.3
million of Federal net operating loss carryforwards.  The Federal net
operating loss carryforwards will expire in future years beginning
2021.  AMT credit carryforwards of $7.4 million are available to the
Company indefinitely to reduce future years’ federal income taxes.





The
Company believes that it will not generate sufficient future taxable income to
realize the tax benefits in foreign jurisdictions related to the deferred tax
assets of Ociesse
s.r.l.and Berry Plastics de Mexico.  Therefore, the Company
has provided a full valuation allowance against its foreign net operating losses
included within the deferred tax assets for Ociesse s.r.l.and
Berry Plastics de Mexico.


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Due to
prior year Sec. 382 limit carryforwards, all Federal operating loss
carryforwards are available for immediate use.  As part of the
effective tax rate calculation, if we determine that a deferred tax asset
arising from temporary differences is not likely to be utilized, we will
establish a valuation allowance against that asset to record it at its expected
realizable value.  The Company has not
provided a valuation allowance on its net operating loss carryforwards in the
United Statues because it has determined that future rewards of its temporary
taxable differences will occur in the same periods and are of the same nature as
the temporary differences giving rise to the deferred tax
assets.Our valuation allowance against deferred tax assets
was $8.2 million and $5.0 million as of fiscal year end 2009 and 2008,
respectively, related to the foreign operating loss carryforwards.




Uncertain
Tax Positions




Effective
September 30, 2007, we adopted the provisions of the Income Taxes standard of
the Codification. This interpretation clarifies the accounting for uncertainty
in income taxes recognized in an enterprise's financial statements in accordance
with guidance provide by FASB and prescribes a recognition threshold of
more-likely-than-not to be sustained upon examination. Upon adoption of the
standard, our policy to include interest and penalties related to gross
unrecognized tax benefits within our provision for income taxes did not change.
There was no adjustment to retained earnings upon adoption on September 30,
2007.




The
following table summarizes the activity related to our gross unrecognized tax
benefits from year end fiscal 2007 to year end fiscal 2009:







Balance
      at end of fiscal 2007
            $
      3.9Increase/decrease of tax positions
            1.4Balance
      at end of fiscal 2008
            $
      5.3Increase/decrease of tax positions
            —Balance at end of fiscal
      2009
            $
      5.3




There are
no unrecognized tax benefits that, if recognized, would affect our effective tax
rate as of fiscal year end 2008 and 2009, respectively.




As of
fiscal year end 2009, due to availability of NOL we have no accrued amounts for
payment of interest. Interest included in our provision for income taxes was not
material in all the periods presented. We have not accrued any penalties related
to our uncertain tax positions as we believe that it is more likely than not
that there will not be any assessment of penalties.




We and
our subsidiaries are routinely examined by various taxing authorities. Although
we file U.S. federal, U.S. state, and foreign tax returns, our major tax
jurisdiction is the U.S. The IRS has completed an examination of our 2003 tax
year. Our 2004 - 2007 tax years remain subject to examination by the IRS for
U.S. federal tax purposes.  There are various other on-going audits in
various other jurisdictions that are not material to our financial
statements.





9.  Retirement Plan





The
Company maintains six defined benefit pension plans which cover certain
manufacturing facilities.  The Company also maintains a retiree health
plan, which covers certain healthcare and life insurance benefits for certain
retired employees and their spouses.  Five of the six defined benefit
plans and the retiree health plan are frozen plans.  The Company uses
fiscal year-end as a measurement date for the retirement plans.





The
Company sponsors two defined contribution 401(k) retirement plans covering
substantially all employees.  Contributions are based upon a fixed
dollar amount for employees who participate and percentages of employee
contributions at specified thresholds.  Contribution expense for these
plans was $1.0 million, $7.8 million and $6.8 million for fiscal 2009, 2008 and
2007, respectively.




The
Company participates in one multiemployer plan. Contributions to the plan are
based on specific percentages of employee compensation and are
immaterial.


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The
Company adopted the guidance of the Compensation section of the ASC effective
September 29, 2007, which requires the recognition of the overfunded or
underfunded status of a defined benefit postretirement plan as an asset or
liability in the balance sheet, with changes in the funded status recorded
through other comprehensive income. The effect of adopting the guidance was to
reduce the accrued benefit liability by $4.4 million at the end of fiscal year
2007, with an offsetting adjustment to ending accumulated other comprehensive
income, net of tax.




The
projected benefit obligations of the Company’s plans presented herein are
materially consistent with the accumulated benefit obligations of such
plans.  The net amount of liability recognized is included in Other
long-term liabilities on the balance sheet.







Defined
      Benefit Pension Plans
            
            Retiree
      Health Plan2009
            2008
            
            2009
            2008Change
      in Projected Benefit Obligations (PBO)PBO
      at beginning of period
            $56.3
            $40.2
            
            $6.2
            $6.6Service
      cost
            0.3
            0.3
            
            —
            —Business
      combinations
            —
            17.4
            
            —
            —Interest
      cost
            3.2
            2.9
            
            0.4
            0.4Actuarial
      loss (gain)
            3.2
            (0.4)
            
            (1.5)
            0.2Benefits
      paid
            (4.3)
            (4.1)
            
            (0.5)
            (1.0)PBO
      at end of period
            $58.7
            $56.3
            
            $4.6
            $6.2Change
      in Fair Value of Plan AssetsPlan
      assets at beginning of period
            $42.1
            $36.2
            
            $
      —
            $
      —Actual
      return on plan assets
            0.6
            (6.6)
            
            —
            —Business
      combinations
            —
            15.1
            
            —
            —Company
      contributions
            1.0
            1.5
            
            0.5
            1.0Benefits
      paid
            (4.3)
            (4.1)
            
            (0.5)
            (1.0)Plan
      assets at end of period
            39.4
            42.1
            
            —
            —Funded
      status
            ($19.3)
            ($14.2)
            
            ($4.6)
            ($6.2)Unrecognized
      net actuarial loss/gain
            —
            —
            
            —
            —Net
      amount recognized
            ($19.3)
            ($14.2)
            
            ($4.6)
            ($6.2)


The
following table presents significant weighted-average assumptions used to
determine benefit obligation and benefit cost for the fiscal years
ended:


Defined
      Benefit Pension Plans
            
            Retiree
      Health Plan(Percents)
            2009
            2008
            
            2009
            2008Weighted-average
      assumptions:Discount
      rate for benefit obligation
            5.25
            6.0
            
            5.0
            6.0Discount
      rate for net benefit cost
            6.0
            6.0
            
            6.0
            6.0Expected
      return on plan assets for net benefit costs
            8.0
            8.0
            
            8.0
            8.0


In
evaluating the expected return on plan assets, Berry considered its historical
assumptions compared with actual results, an analysis of current market
conditions, asset allocations, and the views of
advisers.  Health-care-cost trend rates were assumed to increase at an
annual rate of 7.0% in 2009 and thereafter.  A one-percentage-point
change in these assumed health care cost trend rates would not have a material
impact on our postretirement benefit obligation.


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The
following benefit payments, which reflect expected future service, as
appropriate, are expected to be paid for the fiscal years ending as
follows:





Defined
      Benefit Pension Plans
            
            
            Retiree
      Health Plan2010
            
            $
            4.5
            
            
            $
            0.92011
            
            
            4.4
            
            
            
            0.62012
            
            
            4.4
            
            
            
            0.42013
            
            
            4.4
            
            
            
            0.42014
            
            
            4.4
            
            
            
            0.42015-2019
            
            
            21.2
            
            
            
            1.1





In fiscal
2010, Berry expects to contribute approximately $3.0 million to its retirement
plans to satisfy minimum funding requirements for the year.





Net
pension and retiree health benefit expense included the following components as
of fiscal 2009 and 2008





2009
            2008Defined
      Benefit Pension PlansService cost
            $
      0.3
            $
      0.3Interest cost
            3.2
            2.9Amortization
            0.6
            —Expected return on plan
      assets
            (3.2)
            (3.4)Net periodic benefit
      cost
            $0.9
            $(0.2)Retiree
      Health Benefit PlanInterest and Net periodic
      benefit cost
            $
      0.4
            $
      0.4





Our
defined benefit pension plan asset allocations as of fiscal year end 2009 and
2008 are as follows:


2009
            
            2008Asset
      CategoryEquity
      securities and equity-like instruments
            
            46%
            
            45%Debt
      securities
            
            48
            
            46Other
            
            6
            
            9Total
            
            100%
            
            100%





The
Company’s retirement plan assets are invested with the objective of providing
the plans the ability to fund current and future benefit payment requirements
while minimizing annual Company contributions.  The plans’ asset
allocation strategy reflects a long-term growth strategy with approximately
40-50% allocated to growth investments and 40-50% allocated to fixed income
investments and 5-10% in other, including cash. During fiscal 2009, the
retirement plans purchased $5.5 million principal of the Company's 10 1⁄4%
Senior Subordinated Notes.  The Company re-addresses the allocation of
its investments on an annual basis.


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10.  Restructuring and Impairment Charges





The
Company announced various restructuring plans in the last three fiscal years
which included shutting down facilities in all four of the Company’s operating
segments.





During
February 2007, Covalence conducted a facilities utilization review and approved
a plan to close a manufacturing operation within its Tapes and Coatings division
in Meridian, Mississippi. This facility was closed during the fourth quarter of
fiscal 2007.  The affected business accounted for less than $25.0
million of annual net sales with certain segments of its operations transferred
to other facilities.





In April
2007, the Company announced its intention to shut down a manufacturing facility
within its closed top division located in Oxnard, California. The business from
this facility has been moved to other existing facilities. Also in April 2007,
the Company announced that it would close the Covalence corporate headquarters
in Bedminster, NJ and one of the Company’s division headquarters in Shreveport,
LA.  The reorganization was part of the integration plan to
consolidate certain corporate functions at the Company’s headquarters in
Evansville, Indiana and to consolidate the adhesives and coatings segments into
one new segment called Tapes and Coatings.





During
July and September 2007 the Company announced a restructuring of the operations
within its Flexible Films division, including the closure of five manufacturing
facilities in Yonkers, New York; Columbus, Georgia; City of Industry,
California; Santa Fe Springs, California and Sparks, Nevada.  The
affected business accounted for less than $110.0 million of annual net sales
with certain segments of its operations transferred to other
facilities.





In March
2008 the Company announced the intention to shut down a manufacturing facility
within its Tapes and Coatings division located in San Luis Potosi,
Mexico.





During
fiscal 2009, the Company announced the intention to shut down one manufacturing
facility within its Flexible Films division located in Bloomington, Minnesota
and one manufacturing facility within its Rigid Open Top division located in
Toluca, Mexico.  The $7.8 million of non-cash asset impairment costs
recognized in fiscal 2009 related to these restructuring plans has been reported
as Restructuring expense in the Consolidated Statements of Operations. The
remaining liability has been included within Accrued expenses and other current
liabilities on the Consolidated Balance Sheet.  The affected business
accounted for less than $64.8 million of annual net sales with majority of the
operations transferred to other facilities.





The table
below sets forth the Company’s estimate of the total cost of the restructuring
programs, the portion recognized through fiscal year end 2009 and the portion
expected to be recognized in a future period:





Expected
      Total Costs
            
            Cumulative
      charges through Fiscal 2009
            
            To
      be Recognized in FutureSeverance
      and termination benefits
            
            $  8.7
            
            $  8.4
            
            $0.3Facility
      exit costs
            
            22.1
            
            22.1
            
            —Asset
      impairment
            
            25.9
            
            25.9
            
            —Other
            
            7.0
            
            3.6
            
            3.4Total
            
            $63.7
            
            $60.0
            
            $3.7





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The
tables below sets forth the significant components of the restructuring charges
recognized for the fiscal years ended 2009 and 2008, by segment:





Fiscal
      2009
            
            Tapes
      and Coatings
            
            
            Flexible
      Films
            
            
            Rigid
      Open Top
            
            
            TotalSeverance
      and termination benefits
            
            $
            —
            
            
            $
            0.2
            
            
            $
            0.4
            
            
            $
            0.6Facility
      exit costs
            
            
            0.3
            
            
            
            0.8
            
            
            
            1.8
            
            
            
            2.9Asset
      impairment
            
            
            —
            
            
            
            2.6
            
            
            
            5.2
            
            
            
            7.8Restructuring
      and impairment charges
            
            $
            0.3
            
            
            $
            3.6
            
            
            $
            7.4
            
            
            $
            11.3





Fiscal
      2008
            
            Tapes
      and Coatings
            
            
            Flexible
      Films
            
            
            TotalSeverance
      and termination benefits
            
            $
            0.8
            
            
            $
            (0.5
            )
            
            $
            0.3Facility
      exit costs
            
            
            0.6
            
            
            
            7.3
            
            
            
            7.9Asset
      impairment
            
            
            —
            
            
            
            —
            
            
            
            —Other
            
            
            1.2
            
            
            
            0.2
            
            
            
            1.4Restructuring
      and impairment charges
            
            $
            2.6
            
            
            $
            7.0
            
            
            $
            9.6





Fiscal
      2007
            
            Tapes
      and Coatings
            
            
            Flexible
      Films
            
            
            Corporate
            
            
            Rigid
      Closed Top
            
            
            TotalSeverance
      and termination benefits
            
            $
            0.8
            
            
            $
            3.0
            
            
            $
            3.5
            
            
            $
            0.2
            
            
            $
            7.5Facility
      exit costs
            
            
            0.3
            
            
            
            4.2
            
            
            
            1.9
            
            
            
            4.9
            
            
            
            11.3Asset
      impairment
            
            
            3.4
            
            
            
            14.7
            
            
            
            —
            
            
            
            —
            
            
            
            18.1Other
            
            
            1.6
            
            
            
            0.2
            
            
            
            —
            
            
            
            0.4
            
            
            
            2.2Restructuring
      and impairment charges
            
            $
            6.1
            
            
            $
            22.1
            
            
            $
            5.4
            
            
            $
            5.5
            
            
            $
            39.1





The table
below sets forth the activity with respect to the restructuring accrual at
fiscal year end 2009 and 2008:





Employee
              Severance
              and
      Benefits
            
            
            Facilities
              Exit
              Costs
            
            
            Other
            
            
            Non-cash
      charges
            
            
            TotalBalance
      at fiscal year end 2007
            
            $
            3.0
            
            
            $
            10.4
            
            
            $
            ―
            
            
            $
            ―
            
            
            $
            13.4Charges
            
            
            0.3
            
            
            
            7.9
            
            
            
            1.4
            
            
            
            ―
            
            
            
            9.6Cash
      payments
            
            
            (3.3
            )
            
            
            (14.2
            )
            
            
            (1.4
            )
            
            
            ―
            
            
            
            (18.9
            )Balance
      at fiscal year end 2008
            
            
            ―
            
            
            
            4.1
            
            
            
            ―
            
            
            
            ―
            
            
            
            4.1Charges
            
            
            0.6
            
            
            
            2.9
            
            
            
            ―
            
            
            
            7.8
            
            
            
            11.3Non-cash
      asset impairment
            
            
            ―
            
            
            
            ―
            
            
            
            ―
            
            
            
            (7.8
            )
            
            
            (7.8
            )Cash
      payments
            
            
            (0.6
            )
            
            
            (4.2
            )
            
            
            ―
            
            
            
            ―
            
            
            
            (4.8
            )Balance
      at fiscal year end 2009
            
            $
            ―
            
            
            $
            2.8
            
            
            $
            ―
            
            
            $
            ―
            
            
            $
            2.8





The
restructuring costs accrued as of fiscal year end 2009 will result in future
cash outflows, which are not expected to be material.





11.  Related Party Transactions





Management
Fee





The
Company is charged a management fee by Apollo Management, L.P., an affiliate of
its principal stockholder and Graham Partners, for the provision of management
consulting and advisory services provided throughout the year.  The
management fee is the greater of $3.0 million or 1.25% of adjusted
EBITDA.  In addition, Apollo and Graham have the right to terminate
the agreement at any time, in which case Apollo and Graham will receive
additional consideration equal


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to the
present value of $21 million less the aggregate amount of annual management fees
previously paid to Apollo and Graham, and the employee stockholders will receive
a pro rata payment based on such amount.





Total
management fees charged by Apollo and Graham were $6.4 million, $6.0 million and
$5.9 million for the fiscal years ended 2009, 2008 and 2007,
respectively.  The Company paid $4.4 million, $2.6 million and
$2.5million to entities affiliated with Apollo Management and $0.6 million, $0.4
million and $0.5 million to entities affiliated with Graham for fiscal 2009,
2008 and 2007, respectively.





Berry
Group Indebtedness





On June
5, 2007, the Company’s parent, Berry Group, entered into a $500.0 million senior
unsecured term loan agreement (“Senior Unsecured Term Loan”) with a syndicate of
lenders.  The Senior Unsecured Term Loan matures on June 5, 2014 and
was sold at a 1% discount, which is being amortized over the life of the
loan.  Interest on the agreement is payable on a quarterly basis and
bears interest at the Company’s option based on (1) a fluctuating rate per annum
equal to the higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the
rate of interest in effect for such day as publicly announced from time to time
by Credit Suisse as its “prime rate” plus 525 basis points or (2) LIBOR (0.28%
at fiscal year end 2009) plus 625 basis points.  The Senior Unsecured
Term Loan contains a payment in kind (“PIK”) option which allows Berry Group to
forgo paying cash interest and to add the PIK interest to the outstanding
balance of the loan.  This option expires on the five year anniversary
of the loan and if elected increases the rate per annum by 75 basis points for
the specific interest period.  Berry Group at its election may make
the quarterly interest payments in cash, may make the payments by paying 50% of
the interest in cash and 50% in PIK interest or 100% in PIK interest for the
first five years.  The Senior Unsecured Term Loan is unsecured and
there are no guarantees by Berry Plastics Corporation or any of its subsidiaries
and therefore this financial obligation is not recorded in the Consolidated
Financial Statements of Berry Plastics Corporation.  Berry Group
elected to exercise the PIK interest option during 2008 and 2009.





Berry
Group at its election may call the notes up to the first anniversary date for
100% of the principal balance plus accrued and unpaid interest and an applicable
premium.  Berry Group’s call option for the notes between the one year
and two year and two year and three year anniversary dates changes to 102% and
101% of the outstanding principal balance plus accrued and unpaid interest,
respectively.  The notes also contain a put option which allows the
lender to require Berry Group to repay any principal and applicable PIK interest
that has accrued if Berry Group has an applicable high yield discount obligation
(“AHYDO”) within the definition outlined in the Internal Revenue Code, section
163(i)(1) at each payment period subsequent to the five year anniversary
date.





In fiscal
2009, BP Parallel LLC, a non-guarantor subsidiary of the Company invested $165.9
million to purchase assignments of $514.5 million principal of the Senior
Unsecured Term Loan.  The Company has accounted for this investment as
a held-to-maturity investment in accordance with the investment accounting
standards of the FASB.  The Company has the intent and ability to hold
the security to maturity.  The investment is stated at amortized cost
and the discount is being accreted under the effective interest method to
interest income until the maturity of the debt on June 5, 2014.  The
Company has recorded the investment in Other assets in the Consolidated Balance
Sheet and are recording the interest income and the income from the discount on
the purchase of Senior Unsecured Term Loan in Interest income in the
Consolidated Statements of Operations.  The Company has recognized
$17.6 million of interest and accretion income in fiscal 2009.





Other
Related Party Transactions





Certain
of our management, stockholders and related parties and its affiliates have
independently acquired and hold financial debt instruments of the
Company.  During fiscal 2009 and 2008, interest expense includes $7.5
million and $1.2 million related to this debt, respectively.


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12.  Stockholders’ Equity





2006
Equity Incentive Plan





In
connection with Apollo’s acquisition of the Company, Berry Group adopted an
equity incentive plan pursuant to which options to acquire up to 577,252 shares
of Group’s common stock may be granted.  Prior to fiscal 2009, the
plan was amended to allow for an additional 230,000 options to be
granted.  Options granted under the 2006 Equity Incentive Plan may not
be assigned or transferred, except to Berry Group or by will or the laws of
descent or distribution.  The 2006 Equity Incentive Plan terminates
ten years after adoption and no options may be granted under the plan
thereafter.  The 2006 Equity Incentive Plan allows for the issuance of
non-qualified options, options intended to qualify as “incentive stock options”
within the meaning of the Internal Revenue Code of 1986, as amended, and stock
appreciation rights.  The employees participating in the 2006 Equity
Incentive Plan receive options and stock appreciation rights under the 2006
Equity Incentive Plan pursuant to individual option and stock appreciation
rights agreements, the terms and conditions of which are substantially
identical.  Each option agreement provides for the issuance of options
to purchase common stock of Berry Group.  Options granted under the
2006 Equity Incentive Plan prior to the Merger with Covalence had an exercise
price per share that either (1) was fixed at the fair market value of a share of
common stock on the date of grant or (2) commenced at the fair market value of a
share of common stock on the date of grant and increases at the rate of 15% per
year during the term.  Some options granted under the plan become
vested and exercisable over a five-year period based on continued
service.  Other options become vested and exercisable based on the
achievement by the Company of certain financial targets.  Upon a
change in control, the vesting schedule with respect to certain options
accelerate for a portion of the shares subject to such options.  Since
Berry Group’s common stock is not highly liquid, except in certain limited
circumstances, the stock options may not be redeemable.





In
connection with the Merger with Covalence, Group modified its outstanding stock
options to provide for (i) the vesting of an additional twenty percent (20%) of
the total number of shares underlying such outstanding options; (ii) the
conversion of options with escalating exercise prices to a fixed priced option,
with no increase in the exercise price as of the date of grant of such
escalating priced option; and (iii) with respect to each outstanding option, the
vesting of which was contingent upon the achievement of performance goals, the
deemed achievement of all such performance goals.





During
fiscal 2007, the Group also clarified the anti-dilution provisions of its stock
option plans to require payment of special dividends to holders of outstanding
stock options.   In June 2007, Group’s Board of Directors
declared a special one-time dividend of $77 per common share to shareholders of
record as of June 6, 2007.  The 2007 dividend reduced Group’s
shareholders’ equity for owned shares by approximately
$530.2 million.  In connection with this dividend, the Company
paid a dividend of approximately $87.0 million to Berry Group and used the
proceeds from the Senior Unsecured Term Loan of Berry Group to fund this
dividend payment.





In
connection with the fiscal 2007 paid dividend, holders of vested stock options
received $13.7 million, while an additional $34.5 million was paid to nonvested
option holders on the second anniversary of the dividend grant date (assuming
the nonvested option holders remain employed by the Company).  In
December 2008, the Executive Committee of Berry Group modified the vesting
provisions related to the amounts held in escrow.  This resulted in
the immediate vesting and accelerating the recognition of the remaining
unrecorded stock compensation expense of $11.4 million in selling, general and
administrative expenses recorded in the first fiscal quarter of
2009.





The
Company recognized total stock based compensation of $12.4 for fiscal 2009 and
$19.6 million for the fiscal years ended 2008 and 2007.  The stock
based compensation recognized in fiscal 2009 was comprised of stock based
compensation of $11.4 million related to the unvested stock options associated
with special one-time dividend and $1.0 million of stock based compensation for
the time based and performance based options that were granted after the special
one-time dividend.


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Information
related to the 2006 Equity Incentive Plan as of the fiscal year end 2009 and
2008 is as follows:





2009
            
            2008Number
              Of
              Shares
            Weighted
              Average
              Exercise
              Price
            
            Number
              Of
              Shares
            Weighted
              Average
              Exercise
              PriceOptions
      outstanding, beginning of period
            781,097
            $
      102.38
            
            618,620
            $
      100.00Options
      granted
            36,104
            37.21
            
            204,416
            109.90Options
      exercised or cash settled
            ―
            ―
            
            (5,068)
            98.10Options
      forfeited or cancelled
            (16,198)
            103.44
            
            (36,871)
            104.20Options
      outstanding, end of period
            801,003
            $99.45
            
            781,097
            $102.38Option
      price range at end of period
            $37.21
      - $112.80
            
            $53.50
      - $112.80Options
      exercisable at end of period
            448,850
            
            322,951Options
      available for grant at period end
            6,249
            
            34,295Weighted
      average fair value of options granted during period
            $23
            
            $36





The fair
value for options granted have been estimated at the date of grant using a
Black-Scholes model, generally with the following weighted average
assumptions:





2009
            
            2008
            
            2007Risk-free
      interest rate
            1.7-2.5%
            
            2.7-4.2%
            
            4.5
      – 4.9%Dividend
      yield
            0.0%
            
            0.0%
            
            0.0%Volatility
      factor
            .36
      - .37
            
            .31
      - .34
            
            .20
      - .45Expected
      option life
            5
      years
            
            5
      years
            
            3.73
      – 6.86 years





The
following table summarizes information about the options outstanding at fiscal
year end 2009:





Range
      of
              Exercise
              Prices
            Number
      Outstanding
              at
      September 26, 2009
            Weighted
      Average
              Remaining
      Contractual
              Life
            Weighted
              Average
              Exercise
              Price
            Number
              Exercisable
      at
              September
      26, 2009$37.21
      - $112.80
            801,003
            7
      years
            $99.45
            448,850





Notes
Receivable from Management





Berry
Group has adopted an employee stock purchase program pursuant to which a number
of non-executive employees had the opportunity to invest in Berry Group on a
leveraged basis. In the event that an employee defaults on a promissory note
used to purchase such shares, Berry Group’s only recourse is to the shares of
Berry Group securing the note. In this manner, non-executive management acquired
98,052 shares in the aggregate.  Certain of these amounts were repaid
by the employees in connection with the special one-time
dividend.  The receivable was $2.3 million and $2.5 million at the end
of fiscal 2009 and 2008, respectively.


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13.  Segment and Geographic Data





Berry’s operations are organized into
four reportable segments: Rigid Open Top, Rigid Closed Top, Flexible Films, and
Tapes and Coatings.  The Company has manufacturing and distribution
centers in the United States, Canada, Mexico, Belgium and India.  The
Company evaluates the performance of and allocates resources to these segments
based on revenue and other segment profit measures.  The North
American operation represents 94% of the Company’s net sales and 97% of the
total assets.  Selected information by reportable segment is presented
in the following table:


2009
            2008
            2007Net
      SalesFlexible
      Films
            
            $838.8
            $1,092.2
            $1,042.8Tapes
      and Coatings
            
            427.9
            514.3
            536.7Rigid
      Open Top
            
            1,062.9
            1,053.2
            881.3Rigid
      Closed Top
            
            857.5
            853.4
            598.0Less
      intercompany revenue
            
            —
            —
            (3.8)$3,187.1
            $3,513.1
            $3,055.0Operating
      incomeFlexible
      Films
            
            $5.8
            $(10.3)
            (23.6)Tapes
      and Coatings
            
            3.0
            6.0
            (10.6)Rigid
      Open Top
            
            117.8
            73.7
            69.9Rigid
      Closed Top
            
            59.2
            42.0
            31.7$185.8
            $111.4
            67.4








Depreciation
      and amortizationFlexible
      Films
            
            44.2
            42.3
            51.2Tapes
      and Coatings
            
            33.4
            35.7
            38.4Rigid
      Open Top
            
            83.4
            88.0
            77.3Rigid
      Closed Top
            
            92.5
            90.8
            53.3253.5
            256.8
            220.2





Total
      Assets
            
            2009
            
            2008Flexible
      Films
            
            $  703.2
            
            $   637.8Tapes
      and Coatings
            
            352.1
            
            417.9Rigid
      Open Top
            
            1,822.7
            
            2,019.6Rigid
      Closed Top
            
            1,523.0
            
            1,648.8$4,401.0
            
            $4,724.1GoodwillFlexible
      Films
            
            $    16.8
            
            $    23.3Tapes
      and Coatings
            
            —
            
            5.8Rigid
      Open Top
            
            646.3
            
            646.3Rigid
      Closed Top
            
            768.1
            
            773.9$1,431.2
            
            $1,449.3





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14.  Guarantor and Non-Guarantor Financial
Information





The
Company has First Priority Notes, Second Priority Fixed and Floating Rate Notes
and 10 1⁄4% Senior Subordinated Notes outstanding which are fully, jointly,
severally, and unconditionally guaranteed by substantially all of Berry’s
domestic subsidiaries.  Separate narrative information or financial
statements of the guarantor subsidiaries have not been included because they are
100% wholly owned by the parent company and the guarantor subsidiaries
unconditionally guarantee such debt on a joint and several
basis.  Presented below is condensed consolidating financial
information for the parent company, guarantor subsidiaries and non-guarantor
subsidiaries.  The equity method has been used with respect to
investments in subsidiaries.  The principal elimination entries
eliminate investments in subsidiaries and intercompany balances and
transactions.





Condensed
Supplemental Consolidated Statements of Operations





Fiscal
      2009Parent
              Company
            
            
            Guarantor
              Subsidiaries
            
            
            Non-
              Guarantor
              Subsidiaries
            
            
            Eliminations
            
            
            TotalNet
      sales
            
            $
            736.4
            
            
            $
            2,252.2
            
            
            $
            198.5
            
            
            
            —
            
            
            $
            3,187.1Cost
      of sales
            
            
            670.4
            
            
            
            1,802.3
            
            
            
            168.4
            
            
            
            —
            
            
            
            2,641.1Gross
      profit
            
            
            66.0
            
            
            
            449.9
            
            
            
            30.1
            
            
            
            —
            
            
            
            546.0Selling,
      general and administrative expenses
            
            
            74.9
            
            
            
            230.2
            
            
            
            20.1
            
            
            
            —
            
            
            
            325.2Restructuring
      and impairment charges, net
            
            
            3.6
            
            
            
            0.3
            
            
            
            7.4
            
            
            
            —
            
            
            
            11.3Other
      operating expenses
            
            
            4.6
            
            
            
            15.3
            
            
            
            3.8
            
            
            
            —
            
            
            
            23.7Operating
      income (loss)
            
            
            (17.1
            )
            
            
            204.1
            
            
            
            (1.2
            )
            
            
            —
            
            
            
            185.8Other
      (income) expense
            
            
            (36.9
            )
            
            
            6.5
            
            
            
            —
            
            
            
            —
            
            
            
            (30.4
            )Interest
      expense, net
            
            
            60.0
            
            
            
            (185.7
            )
            
            
            (1.2)
            
            
            
            —
            
            
            
            244.5Equity
      in net income of subsidiaries
            
            
            (20.7
            )
            
            
            —
            
            
            
            —
            
            
            
            20.7
            
            
            
            —Gain
      (loss) from continuing operations before income taxes
            
            
            (19.5
            )
            
            
            11.9
            
            
            
            —
            
            
            
            (20.7)
            
            
            
            (28.3
            )Income
      tax expense (benefit)
            
            
            2.5
            
            
            
            (12.2
            )
            
            
            3.4
            
            
            
            —
            
            
            
            (6.3
            )Income
      (loss) from continuing operations
            
            
            (22.0
            )
            
            
            24.1
            
            
            
            (3.4
            )
            
            
            (20.7)
            
            
            
            (22.0
            )Discontinued
      operations, net of income taxes
            
            
            4.2
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            4.2Net
      income (loss)
            
            $
            (26.2
            )
            
            $
            24.1
            
            
            $
            (3.4
            )
            
            
            (20.7)
            
            
            $
            (26.2
            )





F-33
 Back
to Table of Contents


Fiscal
      2008Parent
              Company
            
            
            Guarantor
              Subsidiaries
            
            
            Non-
              Guarantor
              Subsidiaries
            
            
            Eliminations
            
            
            TotalNet
      sales
            
            $
            974.3
            
            
            $
            2,287.1
            
            
            $
            251.7
            
            
            
            —
            
            
            $
            3,513.1Cost
      of sales
            
            
            900.2
            
            
            
            1,894.2
            
            
            
            224.9
            
            
            
            —
            
            
            
            3,019.3Gross
      profit
            
            
            74.1
            
            
            
            392.9
            
            
            
            26.8
            
            
            
            —
            
            
            
            493.8Selling,
      general and administrative expenses
            
            
            91.0
            
            
            
            224.9
            
            
            
            24.1
            
            
            
            —
            
            
            
            340.0Restructuring
      and impairment charges, net
            
            
            6.2
            
            
            
            3.4
            
            
            
            —
            
            
            
            —
            
            
            
            9.6Other
      operating expenses
            
            
            18.4
            
            
            
            10.2
            
            
            
            4.2
            
            
            
            —
            
            
            
            32.8Operating
      income (loss)
            
            
            (41.5
            )
            
            
            154.4
            
            
            
            (1.5
            )
            
            
            —
            
            
            
            111.4Other
      (income) expense
            
            
            —
            
            
            
            (0.1
            )
            
            
            0.1
            
            
            
            —
            
            
            
            —Interest
      expense, net
            
            
            72.1
            
            
            
            170.8
            
            
            
            18.8
            
            
            
            —
            
            
            
            261.7Equity
      in net income of subsidiaries
            
            
            (12.8)
            
            
            
            —
            
            
            
            —
            
            
            
            21.8
            
            
            
            —Gain
      (loss) from continuing operations before income taxes
            
            
            (100.8
            )
            
            
            (16.3)
            
            
            
            (20.4
            )
            
            
            (12.8
            )
            
            
            (150.3
            )Income
      tax expense (benefit)
            
            
            0.3
            
            
            
            (54.0
            )
            
            
            4.5
            
            
            
            —
            
            
            
            (49.2
            )Net
      income (loss)
            
            $
            (101.1
            )
            
            $
            37.7
            
            
            $
            (24.9
            )
            
            
            (12.8
            )
            
            $
            (101.1
            )








Fiscal
      2007Parent
              Company
            
            
            Guarantor
              Subsidiaries
            
            
            Non-
              Guarantor
              Subsidiaries
            
            
            Eliminations
            
            
            TotalNet
      sales, including related party revenue
            
            $
            973.4
            
            
            $
            1,910.4
            
            
            $
            187.0
            
            
            $
            (15.8
            )
            
            $
            3,055.0Cost
      of sales
            
            
            888.1
            
            
            
            1,542.2
            
            
            
            168.9
            
            
            
            (15.8
            )
            
            
            2,583.4Gross
      profit
            
            
            85.3
            
            
            
            368.2
            
            
            
            18.1
            
            
            
            —
            
            
            
            471.6Selling,
      general and administrative expenses
            
            
            (78.6
            )
            
            
            388.0
            
            
            
            12.6
            
            
            
            (0.5
            )
            
            
            321.5Restructuring
      and impairment charges, net
            
            
            39.1
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            39.1Other
      operating expenses
            
            
            18.1
            
            
            
            23.6
            
            
            
            1.9
            
            
            
            —
            
            
            
            43.6Operating
      income (loss)
            
            
            106.7
            
            
            
            (43.4
            )
            
            
            3.6
            
            
            
            0.5
            
            
            
            67.4Loss
      on extinguished debt
            
            
            15.4
            
            
            
            21.9
            
            
            
            —
            
            
            
            —
            
            
            
            37.3Interest
      expense, net
            
            
            93.2
            
            
            
            150.0
            
            
            
            14.6
            
            
            
            (20.2
            )
            
            
            237.6Equity
      in net income of subsidiaries
            
            
            135.0
            
            
            
            2.0
            
            
            
            —
            
            
            
            (137.0
            )
            
            
            —Income
      (loss) before income taxes
            
            
            (136.9
            )
            
            
            (217.3
            )
            
            
            (11.0)
            
            
            
            157.7
            
            
            
            (207.5
            )Minority
      interest
            
            
            (2.7
            )
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (2.7
            )Income
      tax expense (benefit)
            
            
            (18.0
            )
            
            
            (72.7
            )
            
            
            2.1
            
            
            
            —
            
            
            
            (88.6
            )Net
      income (loss)
            
            $
            (116.2
            )
            
            $
            (144.6)
            
            
            $
            (13.1
            )
            
            $
            157.7
            
            
            $
            (116.2
            )








F-34
 Back
to Table of Contents


Condensed
Supplemental Consolidated Balance Sheet


As
of fiscal year end 2009


($
in millions)


Parent
              Company
            
            
            Guarantor
              Subsidiaries
            
            
            Non-
              Guarantor
              Subsidiaries
            
            
            Eliminations
            
            
            TotalAssetsCurrent
      assets:Cash
      and cash equivalents
            
            $
            6.6
            
            
            $
            0.1
            
            
            $
            3.3
            
            
            $
            —
            
            
            $
            10.0Accounts
      receivable, net of allowance
            
            
            85.6
            
            
            
            223.1
            
            
            
            24.5
            
            
            
            —
            
            
            
            333.2Inventories
            
            
            66.9
            
            
            
            286.7
            
            
            
            20.4
            
            
            
            —
            
            
            
            374.0Prepaid
      expenses and other current
            
            
            0.9
            
            
            
            62.3
            
            
            
            11.2
            
            
            
            —
            
            
            
            74.4Total
      current assets
            
            
            160.0
            
            
            
            572.2
            
            
            
            59.4
            
            
            
            —
            
            
            
            791.6Property,
      plant and equipment, net
            
            
            183.5
            
            
            
            657.0
            
            
            
            35.1
            
            
            
            —
            
            
            
            875.6Intangible
      assets, net
            
            
            185.3
            
            
            
            2,296.1
            
            
            
            58.1
            
            
            
            (0.9
            )
            
            
            2,538.6Investment
      in Subsidiaries
            
            
            3,295.3
            
            
            
            —
            
            
            
            —
            
            
            
            (3,295.3
            )
            
            
            —Other
      assets
            
            
            5.0
            
            
            
            3.8
            
            
            
            210.9
            
            
            
            (24.5
            )
            
            
            195.2Total
      Assets
            
            
            3,829.1
            
            
            
            3,529.1
            
            
            
            363.5
            
            
            
            (3,320.7
            )
            
            
            4,401.0Liabilities
      and EquityCurrent
      liabilities:Accounts
      payable
            
            $
            41.5
            
            
            $
            180.7
            
            
            $
            7.6
            
            
            $
            —
            
            
            $
            229.8Accrued
      and other current liabilities
            
            
            52.7
            
            
            
            129.5
            
            
            
            11.1
            
            
            
            (0.4
            )
            
            
            192.9Long-term
      debt—current portion
            
            
            12.0
            
            
            
            5.5
            
            
            
            —
            
            
            
            —
            
            
            
            17.5Total
      current liabilities
            
            
            106.2
            
            
            
            315.7
            
            
            
            18.7
            
            
            
            (0.4
            )
            
            
            440.2Long-term
      debt
            
            
            3,365.0
            
            
            
            23.1
            
            
            
            3.7
            
            
            
            (49.6
            )
            
            
            3,342.2Deferred
      tax liabilities
            
            
            —
            
            
            
            194.9
            
            
            
            —
            
            
            
            —
            
            
            
            194.9Other
      long term liabilities
            
            
            36.2
            
            
            
            65.5
            
            
            
            0.3
            
            
            
            —
            
            
            
            102.0Total
      long-term liabilities
            
            
            3,401.2
            
            
            
            283.5
            
            
            
            4.0
            
            
            
            (49.6
            )
            
            
            3,639.1Total
      Liabilities
            
            
            3,507.4
            
            
            
            599.2
            
            
            
            22.7
            
            
            
            (50.0
            )
            
            
            4,079.3Total
      Equity
            
            
            321.7
            
            
            
            2,929.9
            
            
            
            340.8
            
            
            
            (3,270.7
            )
            
            
            321.7Total
      Liabilities and Equity
            
            
            3,829.1
            
            
            
            3,529.1
            
            
            
            363.5
            
            
            
            (3,320.7
            )
            
            
            4,401.0






































F-35
 Back
to Table of Contents


Condensed
Supplemental Consolidated Balance Sheet


As
of fiscal year end 2008


($
in millions)


Parent
              Company
            
            
            Guarantor
              Subsidiaries
            
            
            Non-
              Guarantor
              Subsidiaries
            
            
            Eliminations
            
            
            TotalAssetsCurrent
      assets:Cash
      and cash equivalents
            
            $
            172.6
            
            
            $
            8.7
            
            
            $
            8.4
            
            
            $
            —
            
            
            $
            189.7Accounts
      receivable, net of allowance
            
            
            116.1
            
            
            
            266.1
            
            
            
            40.3
            
            
            
            —
            
            
            
            422.5Inventories
            
            
            140.7
            
            
            
            327.3
            
            
            
            32.3
            
            
            
            —
            
            
            
            500.3Prepaid
      expenses and other current
            
            
            3.8
            
            
            
            70.1
            
            
            
            10.7
            
            
            
            —
            
            
            
            84.6Total
      current assets
            
            
            433.2
            
            
            
            672.2
            
            
            
            91.7
            
            
            
            —
            
            
            
            1,197.1Property,
      plant and equipment, net
            
            
            201.2
            
            
            
            610.9
            
            
            
            50.7
            
            
            
            —
            
            
            
            862.8Intangible
      assets, net
            
            
            216.2
            
            
            
            2,378.3
            
            
            
            67.7
            
            
            
            —
            
            
            
            2,662.2Investment
      in Subsidiaries
            
            
            3,224.6
            
            
            
            —
            
            
            
            —
            
            
            
            (3,224.6
            )
            
            
            —Other
      assets
            
            
            2.0
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            2.0Total
      Assets
            
            $
            4,077.2
            
            
            $
            3,661.4
            
            
            $
            210.1
            
            
            $
            (3,224.6
            )
            
            $
            4,724.1Liabilities
      and EquityCurrent
      liabilities:Accounts
      payable
            
            $
            61.0
            
            
            $
            177.0
            
            
            $
            15.8
            
            
            $
            —
            
            
            $
            253.8Accrued
      and other current liabilities
            
            
            72.3
            
            
            
            122.5
            
            
            
            11.8
            
            
            
            —
            
            
            
            206.6Long-term
      debt—current portion
            
            
            12.0
            
            
            
            9.1
            
            
            
            0.3
            
            
            
            —
            
            
            
            21.4Total
      current liabilities
            
            
            145.3
            
            
            
            308.6
            
            
            
            27.9
            
            
            
            —
            
            
            
            481.8Long-term
      debt
            
            
            3,548.9
            
            
            
            28.6
            
            
            
            0.7
            
            
            
            —
            
            
            
            3,578.2Deferred
      tax liabilities
            
            
            (2.0
            )
            
            
            203.4
            
            
            
            10.9
            
            
            
            —
            
            
            
            212.3Other
      long term liabilities
            
            
            33.1
            
            
            
            64.7
            
            
            
            2.1
            
            
            
            —
            
            
            
            99.9Total
      long-term liabilities
            
            
            3,580.0
            
            
            
            296.7
            
            
            
            13.7
            
            
            
            —
            
            
            
            3,890.4Total
      Liabilities
            
            
            3,725.3
            
            
            
            605.3
            
            
            
            41.6
            
            
            
            —
            
            
            
            4,372.2Total
      Equity
            
            
            351.9
            
            
            
            3,056.1
            
            
            
            168.5
            
            
            
            (3,224.6
            )
            
            
            351.9Total
      Liabilities and Equity
            
            $
            4,077.2
            
            
            $
            3,661.4
            
            
            $
            210.1
            
            
            $
            (3,224.6
            )
            
            $
            4,724.1


F-36
 Back
to Table of Contents


Condensed
Supplemental Consolidated Statements of Cash Flows





Fiscal
      2009Parent
              Company
            
            
            Guarantor
              Subsidiaries
            
            
            Non-
              Guarantor
              Subsidiaries
            
            
            Eliminations
            
            
            TotalCash
      Flow from Operating Activities
            
            $
            287.8
            
            
            $
            133.6
            
            
            $
            (7.0
            )
            
            $
            —
            
            
            $
            414.4Cash
      Flow from Investing ActivitiesAdditions
      to  property, plant, and equipment
            
            
            (47.3
            )
            
            
            (143.0
            )
            
            
            (4.1
            )
            
            
            —
            
            
            
            (194.4
            )Proceeds
      from disposal of assets
            
            
            —
            
            
            
            0.8
            
            
            
            2.8
            
            
            
            —
            
            
            
            3.6Investment
      in Berry Group
            
            
            —
            
            
            
            —
            
            
            
            (168.8
            )
            
            
            —
            
            
            
            (168.8
            )Acquisition
      of business net of cash acquired
            
            
            (4.6
            )
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (4.6
            )Net
      cash used in investing activities
            
            
            (51.9
            )
            
            
            (142.2
            )
            
            
            (170.1
            )
            
            
            —
            
            
            
            (364.2
            )Cash
      Flow from Financing ActivitiesProceeds
      from long-term debt
            
            
            —
            
            
            
            —
            
            
            
            4.5
            
            
            
            —
            
            
            
            4.5Equity
      contributions
            
            
            (169.2
            )
            
            
            —
            
            
            
            168.8
            
            
            
            —
            
            
            
            (0.4
            )Repayment
      of long-term debt
            
            
            (232.2
            )
            
            
            —
            
            
            
            (1.1
            )
            
            
            —
            
            
            
            (233.4
            )Deferred
      financing costs
            
            
            (0.4
            )
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (0.4
            )Net
      cash provided by (used in) financing activities
            
            
            (401.9
            )
            
            
            —
            
            
            
            172.2
            
            
            
            —
            
            
            
            (229.7
            )Effect
      of currency translation on cash
            
            
            —
            
            
            
            —
            
            
            
            (0.2
            )
            
            
            —
            
            
            
            (0.2
            )Net
      increase in cash and cash equivalents
            
            
            (166.0
            )
            
            
            (8.6
            )
            
            
            (5.1
            )
            
            
            —
            
            
            
            (179.7
            )Cash
      and cash equivalents at beginning of period
            
            
            172.6
            
            
            
            8.7
            
            
            
            8.4
            
            
            
            —
            
            
            
            189.7Cash
      and cash equivalents at end of period
            
            $
            6.6
            
            
            $
            0.1
            
            
            $
            3.3
            
            
            $
            —
            
            
            $
            10.0





Fiscal
      2008Parent
              Company
            
            
            Guarantor
              Subsidiaries
            
            
            Non-
              Guarantor
              Subsidiaries
            
            
            Eliminations
            
            
            TotalCash
      Flow from Operating Activities
            
            $
            (32.5
            )
            
            $
            37.5
            
            
            $
            4.8
            
            
            $
            —
            
            
            $
            9.8Cash
      Flow from Investing ActivitiesAdditions
      to of property, plant, and equipment
            
            
            (40.8
            )
            
            
            (119.5
            )
            
            
            (2.1
            )
            
            
            —
            
            
            
            (162.4
            )Proceeds
      from disposal of assets
            
            
            —
            
            
            
            83.0
            
            
            
            —
            
            
            
            —
            
            
            
            83.0Acquisition
      of business net of cash acquired
            
            
            (576.2
            )
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (576.2
            )Net
      cash used in investing activities
            
            
            (617.0
            )
            
            
            (36.5
            )
            
            
            (2.1
            )
            
            
            —
            
            
            
            (655.6
            )Cash
      Flow from Financing ActivitiesProceeds
      from long-term debt
            
            
            1,388.5
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            1,388.5Equity
      contributions
            
            
            (0.5
            )
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (0.5
            )Repayment
      of long-term debt
            
            
            (542.8
            )
            
            
            —
            
            
            
            (0.2
            )
            
            
            —
            
            
            
            (543.0
            )Deferred
      financing costs
            
            
            (26.4
            )
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (26.4
            )Sales
      of interest rate hedges
            
            
            2.4
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            2.4Net
      cash provided by (used in) financing activities
            
            
            821.2
            
            
            
            —
            
            
            
            (0.2
            )
            
            
            —
            
            
            
            821.0Effect
      of currency translation on cash
            
            
            —
            
            
            
            —
            
            
            
            (0.1
            )
            
            
            —
            
            
            
            (0.1
            )Net
      increase in cash and cash equivalents
            
            
            171.7
            
            
            
            1.0
            
            
            
            2.4
            
            
            
            —
            
            
            
            175.1Cash
      and cash equivalents at beginning of period
            
            
            0.9
            
            
            
            7.7
            
            
            
            6.0
            
            
            
            —
            
            
            
            14.6Cash
      and cash equivalents at end of period
            
            $
            172.6
            
            
            $
            8.7
            
            
            $
            8.4
            
            
            $
            —
            
            
            $
            189.7





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Fiscal
      2007Parent
              Company
            
            
            Guarantor
              Subsidiaries
            
            
            Non-
              Guarantor
              Subsidiaries
            
            
            Eliminations
            
            
            TotalCash
      Flow from Operating Activities
            
            $
            23.6
            
            
            $
            115.6
            
            
            $
            (1.9
            )
            
            $
            —
            
            
            $
            137.3Cash
      Flow from Investing ActivitiesAdditions
      to property, plant, and equipment
            
            
            (16.4
            )
            
            
            (75.7
            )
            
            
            (7.2
            )
            
            
            —
            
            
            
            (99.3
            )Proceeds
      from disposal of assets
            
            
            —
            
            
            
            0.8
            
            
            
            10.0
            
            
            
            —
            
            
            
            10.8Acquisition
      of business net of cash acquired
            
            
            (30.0
            )
            
            
            (45.8
            )
            
            
            —
            
            
            
            —
            
            
            
            (75.8
            )Net
      cash used in investing activities
            
            
            (46.4
            )
            
            
            (120.7
            )
            
            
            2.8
            
            
            
            —
            
            
            
            (164.3
            )Cash
      Flow from Financing ActivitiesProceeds
      from long-term debt
            
            
            1,232.6
            
            
            
            —
            
            
            
            0.4
            
            
            
            —
            
            
            
            1,233.0Equity
      contributions
            
            
            (102.5
            )
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (102.5
            )Repayment
      of long-term debt
            
            
            (1,159.0
            )
            
            
            (2.2
            )
            
            
            —
            
            
            
            —
            
            
            
            (1,161.2
            )Deferrede
      financing costs
            
            
            (9.7
            )
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (9.7
            )Net
      cash provided by (used in) financing activities
            
            
            (38.6
            )
            
            
            (2.2
            )
            
            
            0.4
            
            
            
            —
            
            
            
            (40.4
            )Effect
      of currency translation on cash
            
            
            —
            
            
            
            —
            
            
            
            (1.1
            )
            
            
            —
            
            
            
            (1.1
            )Net
      increase (decrease) in cash and cash equivalents
            
            
            (61.4
            )
            
            
            (7.3
            )
            
            
            0.2
            
            
            
            —
            
            
            
            (68.5
            )Cash
      and cash equivalents at beginning of period
            
            
            62.3
            
            
            
            15.0
            
            
            
            5.8
            
            
            
            —
            
            
            
            83.1Cash
      and cash equivalents at end of period
            
            $
            0.9
            
            
            $
            7.7
            
            
            $
            6.0
            
            
            $
            —
            
            
            $
            14.6





15.  Quarterly Financial Data (Unaudited)





The
following table contains selected unaudited quarterly financial data for fiscal
years 2009 and 2008.





2009
            
            
            2008First
            
            
            Second
            
            
            Third
            
            
            Fourth
            
            
            First
            
            
            Second
            
            
            Third
            
            
            FourthNet
      sales
            
            $
            865.0
            
            
            $
            757.8
            
            
            $
            769.7
            
            
            $
            794.6
            
            
            $
            762.7
            
            
            $
            844.3
            
            
            $
            939.9
            
            
            $
            966.2Cost
      of sales
            
            
            738.1
            
            
            
            635.3
            
            
            
            612.6
            
            
            
            655.1
            
            
            
            653.9
            
            
            
            731.9
            
            
            
            800.8
            
            
            
            832.7Gross
      profit
            
            $
            126.9
            
            
            $
            122.5
            
            
            $
            157.1
            
            
            $
            139.5
            
            
            $
            108.8
            
            
            $
            112.4
            
            
            $
            139.1
            
            
            $
            133.5Net
      income (loss)
            
            $
            (29.4
            )
            
            $
            (7.4
            )
            
            $
            1.3
            
            
            $
            9.3
            
            
            $
            (31.3
            )
            
            $
            (29.3
            )
            
            $
            (11.2
            )
            
            $
            (29.3
            )





16.  Subsequent Events





In
October 2009, the Company announced our intention to acquire the equity of
Pliant Corporation (“Pliant”) upon its emergence from reorganization pursuant to
a proceeding under Chapter 11 of the Bankruptcy Code. If the acquisition is
completed, Pliant would be a wholly owned subsidiary of Berry
Plastics.  Pliant is a leading manufacturer of value-added films and
flexible packaging for food, personal care, medical, agricultural and industrial
applications with annual net sales of approximately $1,127.6 million in calendar
2008. Pliant manufactures key components in a wide variety of flexible packaging
products for use in end-use markets such as coffee, confections, snacks, fresh
produce, lidding, and hot-fill liquids as well as providing printed rollstock,
bags and sheets used to package consumer goods. Pliant also offers a diverse
product line of film industry-related products and has achieved leading
positions in many of these product lines.





In
November 2009, in order to fund the $561.0 million Pliant acquisition estimated
purchase price, the Company completed a private placement of $370.0 million
aggregate principal amount of 8 1⁄4% First Priority Senior Secured Notes due on
November 15,


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2015 and
$250.0 million aggregate principal amount of 87⁄8%Second
Priority Senior Secured Notes due on September 15, 2014.  In light of
the conditions required to effect the proposed Pliant acquisition including
customary antitrust approvals, the gross proceeds of $596.3 million, before fees
and expenses, from this offering were placed into segregated escrow collateral
accounts within two of our unrestricted subsidiaries pending our right to
acquire the equity of Pliant upon emergence from
bankruptcy.  Therefore, if the Pliant acquisition does not occur prior
to January 29, 2010, or such earlier date as we determine at our sole discretion
that any of the offering escrow conditions cannot be satisfied, then these Notes
will be subject to a special mandatory redemption at a price equal to 100% of
the gross proceeds of such Notes, plus accrued and unpaid interest to, but not
including, the date of redemption.  As part of acquisition of Pliant,
the Company expects to increase the amount of our lender commitments under our
revolving credit facility by $100 million.





In
November 2009, the Company entered into a definitive agreement to acquire 100%
of the outstanding common stock of Superfos Packaging, Inc., a manufacturer of
injection molded plastic rigid open top containers and other plastic packaging
products for the food, industrial and household chemical, building materials and
personal care end markets which had 2008 annual net sales of $46.8
million.  The purchase price is approximately $82 million and will be
funded from cash on hand or existing credit facilities.


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SIGNATURES





Pursuant to the requirements of Section
13 or 15(d) 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, on the 24th day of November, 2009.





BERRY PLASTICS
CORPORATION








By/s/
Ira G. Boots____


Ira G. Boots


Chairman and Chief Executive Officer








Pursuant to the requirements of the
Securities Exchange Act of 1934, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated:





Signature
            Title
            Date/s/ Ira G. Boots
            Chairman
      of the Board of Directors, Chief Executive Officer and Director (Principal
      Executive Officer)
            November
      24, 2009Ira G. Boots/s/ James M.
      Kratochvil
            Executive
      Vice President, Chief Financial Officer, Treasurer and Secretary
      (Principal Financial and Accounting Officer)
            November
      24, 2009James M.
    Kratochvil/s/ Robert V.
      Seminara
            Director
            November
      24, 2009Robert V.
Seminara/s/ Anthony M.
    Civale
            Director
            November
      24, 2009Anthony M. Civale


S-1
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Supplemental Information To Be
Furnished With Reports Filed Pursuant To Section 15(d) Of The Act By Registrant
Which Has Not Registered Securities Pursuant To Section 12 Of The
Act








The
Registrant has not sent any annual report or proxy material to security
holders.





S-2
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Exhibit
                No.
            Description
      of Exhibit2.1
            Agreement
      and Plan of Merger and Corporate Reorganization, dated as of March 9,
      2007, between Covalence Specialty Materials Holding Corp. and Berry
      Plastics Group, Inc. (incorporated herein by reference to our Registration
      Statement Form S-4, filed on May 14, 2007)4.1
            Indenture,
      by and between Berry Plastics Corporation, as Issuer, certain Guarantors
      and Wells Fargo Bank, National Association, as Trustee, relating to first
      priority floating rate senior secured notes due 2015, dated as of April
      21, 2008 (incorporated herein by reference to Exhibit 4.1 to our Current
      Report on Form 8-K, filed on April 22, 2008)4.2
            Collateral
      Agreement, by and between Berry Plastics Corporation, each Subsidiary of
      the Company identified therein and Wells Fargo Bank, National Association,
      as Collateral Agent, dated as of April 21, 2008 (incorporated herein by
      reference to Exhibit 4.2 to our Current Report on Form 8-K, filed on April
      22, 2008)4.3
            Registration
      Rights Agreement, by and between Berry Plastics Corporation, each
      Subsidiary of the Company identified therein, Banc of America Securities
      LLC, Goldman, Sachs & Co. and Lehman Brothers Inc., dated as of April
      21, 2008 (incorporated herein by reference to Exhibit 4.3 to our Current
      Report on Form 8-K, filed on April 22, 2008)10.1
            Note
      Purchase Agreement, among BPC Acquisition Corp. and Goldman, Sachs &
      Co., as Initial Purchaser, and GSMP 2006 Onshore US, Ltd., GSMP 2006
      Offshore US, Ltd., GSMP 2006 Institutional US, Ltd., GS Mezzanine Partners
      2006 Institutional, L.P., as Subsequent Purchasers, relating to
      $425,000,000 Senior Subordinated Notes due 2016, dated as of September 20,
      2006 (incorporated herein by reference to Exhibit 10.3 to our Registration
      Statement Form S-4, filed on November 2,
      2006)10.2
            Indenture,
      by and between BPC Acquisition Corp. (and following the merger of BPC
      Acquisition Corp. with and into BPC Holding Corporation, BPC Holding
      Corporation, as Issuer, and certain Guarantors) and Wells Fargo Bank,
      National Association, as Trustee, relating to 11% Senior Subordinated
      Notes due 2016, dated as of September 20, 2006 (incorporated herein by
      reference to Exhibit 10.4 to our Registration Statement Form S-4, filed on
      November 2, 2006)10.3
            First
      Supplemental Indenture, by and among BPC Holding Corporation, certain
      Guarantors, BPC Acquisition Corp., and Wells Fargo Bank, National
      Association, as Trustee, dated as of September 20, 2006 (incorporated
      herein by reference to Exhibit 10.5 to our Registration Statement Form
      S-4, filed on November 2, 2006)10.4
            Exchange
      and Registration Rights Agreement, by and among BPC Acquisition Corp. and
      Goldman, Sachs & Co., GSMP 2006 Onshore US, Ltd., GSMP 2006 Offshore
      US, Ltd., and GSMP 2006 Institutional US, Ltd., dated as of September 20,
      2006 (incorporated herein by reference to Exhibit 10.6 to our Registration
      Statement Form S-4, filed on November 2,
      2006)10.5(a)
            U.S.
      $400,000,000 Amended and Restated Credit Agreement, dated as of April 3,
      2007, by and among Covalence Specialty Materials Corp., Berry Plastics
      Group, Inc., certain domestic subsidiaries party thereto from time to
      time, Bank of America, N.A., as collateral agent and administrative agent,
      the lenders party thereto from time to time, and the financial
      institutions party thereto (incorporated herein by reference to Exhibit
      10.1(a) to our Current Report on Form 8-K, filed on April 10,
      2007)10.5(b)
            U.S.
      $1,200,000,000 Second Amended and Restated Credit Agreement, dated as of
      April 3, 2007, by and among Covalence Specialty Materials Corp., Berry
      Plastics Group, Inc., Credit Suisse, Cayman Islands Branch, as collateral
      and administrative agent, the lenders party thereto from time to time, and
      the other financial institutions party thereto (incorporated herein by
      reference to Exhibit 10.1(b) to our Current Report on Form 8-K, filed on
      April 10, 2007).10.5(c)
            Amended
      and Restated Intercreditor Agreement by and among Berry Plastics Group,
      Inc., Covalence Specialty Materials Corp., certain subsidiaries identified
      as parties thereto, Bank of America, N.A. and Credit Suisse, Cayman
      Islands Branch  as first lien agents, and Wells Fargo Bank,
      N.A., as trustee (incorporated herein by reference to Exhibit 10.1(d) to
      our Current Report on Form 8-K, filed on April 10,
2007)10.5(d)
            Indenture
      dated as of  February 16, 2006, among Covalence Specialty
      Materials Corp., the Guarantors named therein and Wells Fargo Bank,
      National Association, as trustee (incorporated herein by reference to
      Exhibit 10.1(e) to our Current Report on Form 8-K, filed on April 10,
      2007).10.5(e)
            First
      Supplemental Indenture dated as of  April 3, 2007, among
      Covalence Specialty Materials Corp. (or its successor), the Guarantors
      identified on the signature pages thereto and Wells Fargo Bank, National
      Association, as trustee (incorporated herein by reference to Exhibit
      10.1(f) to our Current Report on Form 8-K, filed on April 10,
      2007)10.5(f)
            Second
      Supplemental Indenture dated as of  April 3, 2007, among
      Covalence Specialty Materials Corp. (or its successor), Berry Plastics
      Holding Corporation, the Guarantors identified on the signature pages
      thereto and Wells Fargo Bank, National Association, as trustee
      (incorporated herein by reference to Exhibit 10.1(g) to our Current Report
      on Form 8-K, filed on April 10, 2007)10.5(g)
            Second
      Supplemental Indenture dated as of April 3, 2007, among Berry Plastics
      Holding Corporation (or its successor), the existing Guarantors identified
      on the signature pages thereto, the new Guarantors identified on the
      signature pages thereto and Wells Fargo Bank, National Association, as
      trustee (incorporated herein by reference to Exhibit 10.1(h) to our
      Current Report on Form 8-K, filed on April 10, 2007)10.5(h)
            Second
      Supplemental Indenture dated as of April 3, 2007, among Berry Plastics
      Holding Corporation (or its successor), the existing Guarantors identified
      on the signature pages thereto, the new Guarantors identified on the
      signature pages thereto and Wells Fargo Bank, National Association, as
      trustee (incorporated herein by reference to Exhibit 10.1(i) to our
      Current Report on Form 8-K, filed on April 10, 2007)10.5(i)
            Supplement
      No. 1 dated as of April 3, 2007 to the Collateral Agreement dated as of
      September 20, 2006 among Berry Plastics Holding Corporation, each
      subsidiary identified therein as a party and Wells Fargo Bank, National
      Association, as collateral agent (incorporated herein by reference to
      Exhibit 10.1(j) to our Current Report on Form 8-K, filed on April 10,
      2007)10.5(j)
            Employment
      Agreement dated May 26, 2006 between Covalence Specialty Materials Corp.
      and Layle K. Smith (incorporated herein by reference to Exhibit 10.1(k) to
      our Current Report on Form 8-K, filed on April 10,
      2007).10.5(k)
            Indenture,
      by and between BPC Acquisition Corp. (and following the merger of BPC
      Acquisition Corp. with and into BPC Holding Corporation, BPC Holding
      Corporation, as Issuer, and certain Guarantors) and Wells Fargo Bank,
      National Association, as Trustee, relating to $525,000,000 87⁄8%Second
      Priority Senior Secured Fixed Rate Notes due 2014 and $225,000,000 Second
      Priority Senior Secured Floating Rate Notes due 2014, dated as of
      September 20, 2006 (incorporated herein by reference to Exhibit 4.1 to our
      Registration Statement Form S-4, filed on November 2,
      2006)10.5(l)
            First
      Supplemental Indenture, by and among BPC Holding Corporation, certain
      Guarantors, BPC Acquisition Corp., and Wells Fargo Bank, National
      Association, as Trustee, dated as of September 20, 2006 (incorporated
      herein by reference to Exhibit 4.2 to our Registration Statement Form S-4,
      filed on November 2, 2006)10.5(m)
            Registration
      Rights Agreement, by and among BPC Acquisition Corp., BPC Holding
      Corporation, the subsidiaries of BPC Holding Corporation, Deutsche Bank
      Securities Inc., Credit Suisse Securities (USA) LLC, Citigroup Global
      Markets Inc., J.P. Morgan Securities Inc., Banc of America Securities LLC,
      Lehman Brothers Inc., Bear, Stearns & Co., and GE Capital Markets,
      Inc., dated as of September 20, 2006 (incorporated herein by reference to
      Exhibit 4.3 to our Registration Statement Form S-4, filed on
      November 2, 2006)10.5(n)
            Collateral
      Agreement, by and among BPC Acquisition Corp., as Borrower, each
      Subsidiary of the Borrower identified therein, and Wells Fargo Bank, N.A.,
      as Collateral Agent, dated as of September 20, 2006 (incorporated herein
      by reference to Exhibit 4.4 to our Registration Statement Form S-4, filed
      on November 2, 2006)10.6
            Management
      Agreement, among Berry Plastics Corporation, Berry Plastics Group, Inc.,
      Apollo Management VI, L.P., and Graham Partners, Inc., dated as of
      September 20, 2006. (incorporated herein by reference to our Registration
      Statement Form S-4, filed on May 14, 2007)10.7
            Termination
      Agreement, by and among Covalence Specialty Materials Holding Corp.,
      Covalence Specialty Materials Corp., and Apollo Management V, L.P., dated
      as of April 3, 2007. (incorporated herein by reference to our Registration
      Statement Form S-4, filed on May 14,2007)10.8
            2006
      Equity Incentive Plan (incorporated herein by reference to Exhibit 10.8 to
      our Registration Statement Form S-4, filed on November 2,
      2006)10.9
            Form
      of Performance-Based Stock Option Agreement of Berry Plastics Group, Inc.
      (incorporated herein by reference to Exhibit 10.9 to our Registration
      Statement Form S-4, filed on November 2,
  2006)10.10
            Form
      of Accreting Stock Option Agreement of Berry Plastics Group, Inc.
      (incorporated herein by reference to Exhibit 10.10 to our Registration
      Statement Form S-4, filed on November 2,
  2006)10.11
            Form
      of Time-Based Stock Option Agreement of Berry Plastics Group, Inc.
      (incorporated herein by reference to Exhibit 10.11 to our Registration
      Statement Form S-4, filed on November 2,
  2006)10.12
            Form
      of Performance-Based Stock Appreciation Rights Agreement of Berry Plastics
      Group, Inc. (incorporated herein by reference to Exhibit 10.12 to our
      Registration Statement Form S-4, filed on November 2,
      2006)10.13
            Employment
      Agreement, dated September 20, 2006, between Berry Plastics Corporation
      and Ira G. Boots (incorporated herein by reference to Exhibit 10.13 to our
      Registration Statement Form S-4, filed on November 2,
      2006)10.14
            Employment
      Agreement, dated September 20, 2006, between Berry Plastics Corporation
      and James M. Kratochvil (incorporated herein by reference to Exhibit 10.14
      to our Registration Statement Form S-4, filed on November 2,
      2006)10.15
            Employment
      Agreement, dated September 20, 2006, between Berry Plastics Corporation
      and R. Brent Beeler (incorporated herein by reference to Exhibit 10.15 to
      our Registration Statement Form S-4, filed on November 2,
      2006)10.16
            Employment
      Agreement, dated November 22, 1999 between Berry Plastics Corporation and
      G. Adam Unfried (incorporated herein by reference to Exhibit 10.23 of the
      Company’s Current Annual Report on Form 10-K filed with the SEC on March
      22, 2006)10.17
            Amendment
      No. 1 to Employment Agreement, dated November 22, 1999 between Berry
      Plastics Corporation and G. Adam Unfried dated November 23, 2004
      (incorporated herein by reference to Exhibit 10.24 of the Company’s
      Current Annual Report on Form 10-K filed with the SEC on March 22,
      2006)10.18
            Amendment
      No. 2 to Employment Agreement, dated November 22, 1999 between Berry
      Plastics Corporation and G. Adam Unfried dated March 10, 2006
      (incorporated herein by reference to Exhibit 10.25 of the Company’s
      Current Annual Report on Form 10-K filed with the SEC on March 22,
      2006)10.19
            Amendment
      No. 3 to Employment Agreement, dated November 22, 1999 between Berry
      Plastics Corporation and G. Adam Unfried dated September 20, 2006.
      (incorporated herein by reference to our Registration Statement Form S-4,
      filed on May 14,2007)10.20
            Employment
      Agreement, dated April 3, 2007 between Berry Plastics Corporation and
      Thomas E. Salmon (incorporated herein by reference to Exhibit 10.20 of the
      Company’s Current Annual Report on Form 10-K filed with the SEC on
      September 27, 2008)10.21
            Purchase
      and Sale Agreement, dated as of December 15, 2008, by and between BP
      Parallel Corporation, a Delaware corporation, and Apollo Management VI,
      L.P., a Delaware limited partnership (incorporated herein by reference to
      Exhibit 10.21 of the Company’s Current Annual Report on Form 10-K filed
      with the SEC on September 27, 2008)12.1*
            Computation
      of Ratio of Earnings to Fixed Charges21.1*
            Subsidiaries
      of the Registrant31.1*
            Rule
      13a-14(a)/15d-14(a) Certification of the Chief Executive
      Officer31.2*
            Rule
      13a-14(a)/15d-14(a) Certification of the Chief Financial
      Officer32.1*
            Section
      1350 Certification of the Chief Executive Officer32.2*
            Section
      1350 Certification of the Chief Financial
  Officer








*Filed herewith.