SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.  20549





FORM
10-Q





(Mark
One)





[X]            Quarterly Report Pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934





For the
quarterly period ended December 29, 2007


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 333-138380


BERRY
PLASTICS CORPORATION


(f/k/a
Berry Plastics Holding Corporation)


(Exact name of registrant as
specified in its charter)


Delaware
            35-1814673(State
      or other jurisdiction
              of
      incorporation or organization)
            (IRS
      employer
              identification
      number)





SEE
TABLE OF ADDITIONAL REGISTRANT GUARANTORS





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





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





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





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





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


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





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





As of
February 8, 2008 all of the outstanding 100 shares of the Common Stock, $.01 par
value, of Berry Plastics Corporation were held by Berry Plastics Group,
Inc.


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)


2




Table
of Additional Registrant Guarantors (Continued)







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
              OfficesCovalence
      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


3


INTRODUCTION





On
February 16, 2006, Apollo Management, L. P. (“Apollo”), an investment management
firm, through its affiliate Apollo Management V., L. P.,
acquired substantially all of the assets and liabilities of Tyco Plastics
& Adhesives under a Stock and Asset Purchase Agreement dated December 20,
2005 among Apollo Management V, L.P and its investee Covalence Specialty
Materials Holding Corp. (“Old Covalence Holding”), Tyco International S.A., and
Tyco Group S.a.r.l.  These assets and liabilities were acquired by Old
Covalence Holding’s wholly-owned subsidiary Covalence Specialty Materials Corp.
(“Old Covalence”).  As a result, Old Covalence acquired through
certain equity interests of, and certain assets and liabilities held by direct
and indirect operating subsidiaries of Tyco International Ltd.





On
September 20, 2006, Berry Plastics Group, Inc.’s (an affiliate of Apollo and
investee of Apollo Investment Fund VI, L. P.) (“Old Berry Group”)
wholly-owned subsidiary BPC Acquisition Corp. merged with and into BPC Holding
Corporation pursuant to an agreement and plan of merger (“Apollo Berry Merger”),
dated June 28, 2006, with BPC Holding Corporation continuing as the surviving
corporation.  Following the consummation of the Apollo Berry Merger,
BPC Holding Corporation changed its name to Berry Plastics Holding
Corporation (“Old Berry Holding”).  Pursuant to the Apollo Berry
Merger, Old Berry Holding was a wholly-owned subsidiary of Old Berry Group, the
principal stockholders of which were Apollo Investment Fund VI, L.P., AP Berry
Holdings, LLC, Graham Berry Holdings, L.P. and management.  Apollo
Investment Fund VI, L.P. and AP Berry Holdings, LLC are affiliates of
Apollo.  Graham Berry Holdings, L.P. is an affiliate of Graham
Partners, Inc. (“Graham”), a private equity firm.





On April
3, 2007, Old Covalence Holding merged with Old Berry Group (the “Berry
Covalence Merger”).  Old Covalence Holding was the surviving
corporation and changed its name to Berry Plastics Group, Inc. (“Berry
Group”).  As a result of the Berry Covalence Merger, Old Berry Holding
and Old Covalence were combined as a direct subsidiary of Berry Group and
retained the name Berry Plastics Holding Corporation.





Prior to
the Berry Covalence Merger, Old Covalence and Old Berry Holding were considered
entities under the common control of Apollo Management L.P. as defined in
Emerging Issues Task Force (“EITF”) Issue No. 02-5, Definition of Common
Control in Relation to FASB Statement of Financial Accounting Standards
No. 141, Business Combinations.  As a result of the Berry
Covalence Merger, the financial statements of these entities are being presented
retroactively on a combined basis in a manner similar to a pooling of interests,
and include the results of operations of each business from the date of
acquisition by the Apollo affiliates.





In
connection with the closing of the Berry Covalence Merger, Berry
Plastics Holding Corporation adopted the fiscal year-end of the accounting
acquirer (Old Covalence).  The Company, therefore has adopted a
September year-end and commencing with periodic reports after the consummation
of the Berry Covalence Merger on April 3, 2007, began filing its periodic
reports on a combined basis.





On
December 29, 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”).


4





The
financial data for the Company for the thirteen weeks ended December 30, 2006
include the results of operations of Old Covalence and the Old Berry Holding
combined.  The financial data for the Company for the thirteen weeks
ended December 29, 2007 include the consolidated results of operations of the
Company.  The balance sheets as of December 29, 2007 and September 29,
2007 also represent the consolidated balance sheets of the Company as of each
date, respectively.  All adjustments that management considers
necessary for a fair presentation of Berry Plastics Corporation’s financial
position and results of operations as of the date and for the period indicated
have been included.





CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS





This Form
10-Q includes "forward-looking statements," within the meaning of Section 27A of
the Securities Act and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), with respect to our financial condition, results
of operations and business and our expectations or beliefs concerning future
events.  The forward-looking statements include, in particular,
statements about our plans, strategies and prospects under the heading
"Management’s Discussion and Analysis of Financial Condition and Results of
Operations".  You can identify certain forward-looking statements by
our use of forward-looking terminology such as, but not limited to, "believes,"
"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-Q.  Factors that
could cause actual results to differ materially from those expressed or implied
by the forward-looking statements include:





·
            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;


·
            catastrophic
      loss of one of our key manufacturing
facilities;


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


·
            risks
      associated with our substantial indebtedness and debt
    service;


·
            performance
      of our business and future operating
results;


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


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


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


·
            the
      factors discussed in our Form 10-K for the fiscal year ended September 29,
      2007 in the section titled “Risk
Factors.”





Readers
should carefully review the factors discussed in our Form 10-K for the fiscal
year ended September 29, 2007 in the section titled “Risk Factors” and other
risk factors identified from time to time in our periodic filings with the
Securities and Exchange Commission and should not place undue reliance on our
forward-looking statements.  We undertake no obligation to update any
forward-looking statements to reflect changes in underlying assumptions or
factors, new information, future events or other changes.


5


AVAILABLE
INFORMATION





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


6





Berry
Plastics Corporation





Form
10-Q Index





For
Quarterly Period Ended December 29, 2007








Part
      I.   Financial Information
              
              
              Page No.Item
      1.
              Financial
      Statements:Consolidated
      Balance Sheets
              8Consolidated
      or Combined Statements of Operations
              10Consolidated
      or Combined Statements of Changes inStockholders’
      Equity
              11Consolidated
      or Combined Statements of Cash Flows
              12Notes
      to Consolidated or Combined Financial Statements
              13Item
      2.
              Management’s
      Discussion and Analysis ofFinancial
      Condition and Results of Operations
              29Item
      3.
              Quantitative
      and Qualitative Disclosures about Market Risk
              37Item
      4.
              Controls
      and Procedures
              38Part
      II.   Other InformationItem
      1.
              Legal
      Proceedings
              39Item
      1A.
              Risk
      Factors
              39Item
      2.
              Unregistered
      Sales of Equity Securities and Use of Proceeds
              39Item
      3.
              Defaults
      Upon Senior Securities
              39Item
      4.
              Submission
      of Matters to a Vote of Security Holders
              40Item
      5.
              Other
      Information
              40Item
      6.
              Exhibits
              40Signature
              
              
              41


7


Part
1.   Financial Information


Item
1.   Financial Statements





Berry
Plastics Corporation


Consolidated
Balance Sheets


(In
Millions of Dollars)





December
      29,
              2007
            
            
            September
      29,
              2007(Unaudited)AssetsCurrent
      assets:Cash and cash
      equivalents
            
            $
            21.8
            
            
            $
            14.6Accounts receivable (less
      allowance for doubtful accounts
              of
      $13.9 at December 29, 2007 and $11.3 at September 29,
2007)
            
            
            347.3
            
            
            
            372.5Inventories:Finished goods
            
            
            229.4
            
            
            
            227.3Raw materials and work in
      process
            
            
            188.0
            
            
            
            158.0417.4
            
            
            
            385.3Deferred income
    taxes
            
            
            31.7
            
            
            
            31.7Prepaid expenses and other
      current assets
            
            
            44.1
            
            
            
            35.7Total
      current assets
            
            
            862.3
            
            
            
            839.8Property
      and equipment:Land
            
            
            38.1
            
            
            
            42.2Buildings and
      improvements
            
            
            151.4
            
            
            
            178.7Equipment and construction in
      progress
            
            
            782.5
            
            
            
            735.1972.0
            
            
            
            956.0Less accumulated
      depreciation
            
            
            206.0
            
            
            
            171.0766.0
            
            
            
            785.0Goodwill,
      intangible assets and deferred costs
            
            
            2,271.7
            
            
            
            2,242.1Other
      assets
            
            
            2.3
            
            
            
            2.52,274.0
            
            
            
            2,244.6Total
      assets
            
            $
            3,902.3
            
            
            $
            3,869.4




8





Berry
Plastics Corporation


Consolidated
Balance Sheets (continued)


(In
Millions of Dollars)





December
      29,
              2007
            
            
            September
      29,
              2007(Unaudited)Liabilities
      and stockholders' equityCurrent
      liabilities:Accounts payable
            
            $
            275.7
            
            
            $
            263.2Accrued expenses and other
      current liabilities
            
            
            196.7
            
            
            
            189.4Current portion of long-term
      debt
            
            
            17.1
            
            
            
            17.4Total
      current liabilities
            
            
            489.5
            
            
            
            470.0Long-term
      debt, less current portion
            
            
            2,708.3
            
            
            
            2,693.3Deferred
      income taxes
            
            
            195.6
            
            
            
            217.7Other
      long-term liabilities
            
            
            88.6
            
            
            
            38.4Total
      liabilities
            
            
            3,482.0
            
            
            
            3,419.4Commitments
      and contingenciesStockholders'
      equity:Contributed equity from parent,
      net
            
            
            603.0
            
            
            
            598.1Accumulated
    deficit
            
            
            (183.2
            )
            
            
            (151.9
            )Accumulated other comprehensive
      income
            
            
            0.5
            
            
            
            3.8Total
      stockholders’ equity
            
            
            420.3
            
            
            
            450.0Total
      liabilities and stockholders’ equity
            
            $
            3,902.3
            
            
            $
            3,869.4








See
notes to consolidated or combined financial statements.


9





Berry
Plastics Corporation


Consolidated
or Combined Statements of Operations


(Unaudited)


(In
Millions of Dollars)





Thirteen
      Weeks EndedDecember
      29,
              2007
            
            
            December
      30,
              2006Net
      sales
            
            $
            762.7
            
            
            $
            703.6Cost
      of goods sold
            
            
            653.9
            
            
            
            617.2Gross
      profit
            
            
            108.8
            
            
            
            86.4Operating
      expenses:Selling, general and
      administrative
            
            
            81.8
            
            
            
            74.5Restructuring and impairment
      charges, net
            
            
            3.5
            
            
            
            0.3Other operating
      expenses
            
            
            13.0
            
            
            
            4.1Operating
      income
            
            
            10.5
            
            
            
            7.5Other
      expenses
            
            
            —
            
            
            
            0.1Interest
      expense, net
            
            
            61.5
            
            
            
            59.9Loss
      before income taxes
            
            
            (51.0
            )
            
            
            (52.5
            )Income
      tax benefit
            
            
            (19.7
            )
            
            
            (19.5
            )Minority
      interest, net of tax
            
            
            —
            
            
            
            (2.2
            )Net
      loss
            
            $
            (31.3
            )
            
            $
            (30.8
            )








See notes to consolidatedor combinedfinancial
statements.


10


Berry
Plastics Corporation


Consolidated
or Combined Statement of Changes in Stockholders' Equity


For
Thirteen Weeks Ended December 29, 2007 and December 30, 2006


(Unaudited)


(In
Millions of Dollars)





Parent
              Company
              Investment
            
            
            Accumulated
              Other
              Comprehensive
              Income
            
            
            Accumulated
              Deficit
            
            
            Total
            
            
            Comprehensive
      Income (Loss)Balance
      at September 30, 2006
            
            $
            440.6
            
            
            $
            0.2
            
            
            $
            (31.2
            )
            
            $
            409.6Distributions
      – Covalence
            
            
            (1.3
            )
            
            
            —
            
            
            
            —
            
            
            
            (1.3
            )Interest
      on notes receivable
            
            
            (0.1
            )
            
            
            —
            
            
            
            —
            
            
            
            (0.1
            )Treasury
      stock purchases
            
            
            (0.1
            )
            
            
            —
            
            
            
            —
            
            
            
            (0.1
            )Stock-based
      compensation
            
            
            0.5
            
            
            
            —
            
            
            
            —
            
            
            
            0.5Translation
      gains
            
            
            —
            
            
            
            1.3
            
            
            
            —
            
            
            
            1.3
            
            
            $
            1.3Other
      comprehensive gains
            
            
            —
            
            
            
            0.6
            
            
            
            —
            
            
            
            0.6
            
            
            
            0.6Net
      loss
            
            
            —
            
            
            
            —
            
            
            
            (30.8
            )
            
            
            (30.8
            )
            
            
            (30.8
            )Balance
      at December 30, 2006
            
            $
            439.6
            
            
            $
            2.1
            
            
            $
            (62.0
            )
            
            $
            379.7
            
            
            $
            (28.9
            )





Parent
              Company
              Investment
            
            
            Accumulated
              Other
              Comprehensive
              Income
              (Losses)
            
            
            Accumulated
              Deficit
            
            
            Total
            
            
            Comprehensive
      Income (Loss)Balance
      at September 29, 2007
            
            $
            598.1
            
            
            $
            3.8
            
            
            $
            (151.9
            )
            
            $
            450.0Stock
      compensation expense
            
            
            4.7
            
            
            
            —
            
            
            
            —
            
            
            
            4.7Net
      transfers from parent
            
            
            0.2
            
            
            
            —
            
            
            
            —
            
            
            
            0.2Net
      loss
            
            
            —
            
            
            
            —
            
            
            
            (31.3
            )
            
            
            (31.3
            )
            
            $
            (31.3
            )Currency
      translation
            
            
            —
            
            
            
            2.3
            
            
            
            —
            
            
            
            2.3
            
            
            
            2.3Interest
      rate hedges
            
            
            —
            
            
            
            (5.6
            )
            
            
            —
            
            
            
            (5.6
            )
            
            
            (5.6
            )Balance
      at December 29, 2007
            
            $
            603.0
            
            
            $
            0.5
            
            
            $
            (183.2
            )
            
            $
            420.3
            
            
            $
            (34.6
            )





See notes to consolidatedor combinedfinancial
statements.





11











Berry
Plastics Corporation


Consolidated
or Combined Statements of Cash Flows


(Unaudited)


(In
Millions of Dollars)





Thirteen
      Weeks EndedDecember
      29, 2007
            
            
            December
      30, 2006Operating
      activitiesNet
      loss
            
            $
            (31.3
            )
            
            $
            (30.8
            )Adjustments
      to reconcile net loss to net cash provided by operating
      activities:Depreciation
      and amortization
            
            
            59.6
            
            
            
            49.1Non-cash
      interest expense
            
            
            1.3
            
            
            
            2.2Non-cash
      compensation
            
            
            4.7
            
            
            
            0.5Minority
      interest
            
            
            —
            
            
            
            (2.2
            )Deferred
      income tax benefit
            
            
            (20.7
            )
            
            
            (19.5
            )Changes
      in operating assets and liabilities:Accounts receivable,
      net
            
            
            31.0
            
            
            
            65.3Inventories
            
            
            (29.0
            )
            
            
            47.7Prepaid expenses and other
      assets
            
            
            (9.0
            )
            
            
            7.6Accounts payable and other
      liabilities
            
            
            14.0
            
            
            
            (60.1
            )Net
      cash provided by operating activities
            
            
            20.7
            
            
            
            59.8Investing
      activitiesAdditions
      to property and equipment
            
            
            (38.6
            )
            
            
            (14.2
            )Proceeds
      from disposal of assets
            
            
            82.2
            
            
            
            —Acquisition
      of business, net of cash acquired
            
            
            (73.7
            )
            
            
            (30.2
            )Net
      cash used for investing activities
            
            
            (30.1
            )
            
            
            (44.4
            )Financing
      activitiesProceeds
      from long-term borrowings
            
            
            23.9
            
            
            
            —Payments
      on long-term borrowings
            
            
            (9.5
            )
            
            
            (23.4
            )Equity
      contributions (distributions), net
            
            
            0.2
            
            
            
            (1.3
            )Net
      cash provided by (used for) financing activities
            
            
            14.6
            
            
            
            (24.7
            )Effect
      of exchange rate changes on cash
            
            
            2.0
            
            
            
            (0.2
            )Net
      increase (decrease) in cash and cash equivalents
            
            
            7.2
            
            
            
            (9.5
            )Cash
      and cash equivalents at beginning of period
            
            
            14.6
            
            
            
            83.1Cash
      and cash equivalents at end of period
            
            $
            21.8
            
            
            $
            73.6





See
notes to consolidated or combined financial statements.


12


Berry
Plastics Corporation


Notes to
Consolidated or Combined Financial Statements


(Unaudited)


(In
millions of dollars, except as otherwise noted)








1.
            Background
      and Nature of Operations





Berry
Plastics Corporation manufactures and markets plastic packaging products,
plastic film products, specialty adhesives and coated products.  At
December 29, 2007 the Company had 57 production and manufacturing
facilities, with 49 located in the United States.





On
February 16, 2006, Apollo Management, L. P. (“Apollo”), an investment management
firm, through its affiliate Apollo Management V., L. P.,
acquired substantially all of the assets and liabilities of Tyco Plastics
& Adhesives under a Stock and Asset Purchase Agreement dated December 20,
2005 among Apollo Management V, L.P and its investee Covalence Specialty
Materials Holding Corp. (“Old Covalence Holding”), Tyco International S.A., and
Tyco Group S.a.r.l.  These assets and liabilities were acquired by Old
Covalence Holding’s wholly-owned subsidiary Covalence Specialty Materials Corp.
(“Old Covalence”).  As a result, Old Covalence acquired through
certain equity interests of, and certain assets and liabilities held by direct
and indirect operating subsidiaries of Tyco International Ltd.





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





On
September 20, 2006, Berry Plastics Group, Inc.’s (an affiliate of Apollo and
investee of Apollo Investment Fund VI, L. P.) (“Old Berry Group”)
wholly-owned subsidiary BPC Acquisition Corp. merged with and into BPC Holding
Corporation pursuant to an agreement and plan of merger (“Apollo Berry Merger”),
dated June 28, 2006, with BPC Holding Corporation continuing as the surviving
corporation.  Following the consummation of the Apollo Berry Merger,
BPC Holding Corporation changed its name to Berry Plastics Holding
Corporation (“Old Berry Holding”).  Pursuant to the Apollo Berry
Merger, Old Berry Holding was a wholly-owned subsidiary of Old Berry Group, the
principal stockholders of which were Apollo Investment Fund VI, L.P., AP Berry
Holdings, LLC, Graham Berry Holdings, L.P. and management.  Apollo
Investment Fund VI, L.P. and AP Berry Holdings, LLC are affiliates of
Apollo.  Graham Berry Holdings, L.P. is an affiliate of Graham
Partners, Inc. (“Graham”), a private equity firm.





The
Apollo Berry Merger was accounted for using the purchase method of accounting,
and accordingly, the purchase price has been allocated to identifiable assets
and liabilities based on estimated fair values at the transaction
date.  The impact of writing up inventory to net realizable value was
$10.1 million and resulted in a charge to cost of goods sold for the period from
September 20 to September 30, 2006 of $2.9 million and $7.2 million for the
thirteen weeks ended December 30, 2006.





On April
3, 2007, Old Covalence Holding merged with Old Berry Group (the “Berry
Covalence Merger”).  Old Covalence Holding was the surviving
corporation and changed its name to Berry Plastics Group, Inc. (“Berry
Group”).  As a result of the Berry Covalence Merger, Old
Berry


13


Holding
and Old Covalence were combined as a direct subsidiary of Berry Group and
retained the name Berry Plastics Holding Corporation.





Prior to
the Berry Covalence Merger, Old Covalence and Old Berry Holding were considered
entities under the common control of Apollo as defined in Emerging Issues
Task Force (“EITF”) Issue No. 02-5, Definition of Common Control in
Relation to FASB Statement of Financial Accounting Standards No. 141,
Business Combinations.  As a result of the Berry Covalence Merger, the
financial statements of these entities are being presented retroactively on a
combined basis in a manner similar to a pooling of interests, and include the
results of operations of each business from the date of acquisition by the
Apollo affiliates.





In
connection with the closing of the Berry Covalence Merger, Berry
Plastics Holding Corporation adopted the fiscal year-end of the accounting
acquirer (Old Covalence).  The Company,
therefore,   adopted a September year-end and commencing with
periodic reports after the consummation of the Berry Covalence Merger on April
3, 2007, began filing its periodic reports on a combined basis.





On
December 29, 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”).





2.
            Basis
      of Presentation





The
accompanying unaudited consolidated or combined financial statements of Berry
have been prepared in accordance with accounting principles generally accepted
in the United States (“GAAP”) for interim financial information and the
instructions for Form 10-Q and Article 10 of Regulation
S-X.  Accordingly, they do not include all of the information and
footnotes required by GAAP for complete financial statements.  In the
opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been
included.  Operating results for the periods presented are not
necessarily indicative of the results that may be expected for the full fiscal
year.  The accompanying financial statements include the results of
the Company and its wholly-owned subsidiaries.  The Company is a
wholly-owned subsidiary of Berry Group.  For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Company’s Form 10-K filed with the Securities and Exchange Commission for
the fiscal year ended September 29, 2007.  Certain amounts in the
prior year financial statements have been reclassified to conform to the current
year presentation.  The acquisitions by affiliates of Apollo of Old
Covalence Holding and Old Berry Group have both been accounted for using the
purchase method of accounting.  All intercompany transactions have
been eliminated.





The
Company’s operating results  for the thirteen weeks ended December 30,
2006 represents the combined results of operations of Old Covalence and Old
Berry Holding.  Minority interest for the thirteen weeks ended
December 30, 2006 represents the non-Apollo equity owners share of the loss for
the period.  As previously disclosed in the Company’s Form 10-K, the
minority interest was exchanged in connection with the Berry Covalence
Merger.  The Company’s operating results for the thirteen weeks ended
December 29, 2007 include the consolidated operating results of the
Company.  The balance sheets as of December 29, 2007 and September 29,
2007 represent the consolidated balance sheets of the Company as of the
respective dates.  Berry has recorded expense


14


in their
financial statements related to stock compensation of Berry Group, management
fees 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.  Contributed equity from parent
includes the equity from Berry Group that was invested in Berry by Apollo and
other shareholders.  Berry, through its wholly-owned subsidiaries
operates in four primary segments:  rigid open top, rigid closed top,
flexible films, and tapes/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.





In June
2007, Berry Group made a special one time distribution to their shareholders and
option holders.  The special distribution reduced Berry Group’s
stockholders’ equity for owned shares by $530.2 million.  The dividend
was financed with a new $500.0 million senior unsecured term loan which matures
in June 2014 and an $87.0 million dividend from the Company.  The term
loan accrues interest at LIBOR plus 625 basis points and Berry Group at its
election can settle these quarterly interest payments in cash or elect a payment
in kind (“PIK”) option which adds the quarterly interest to the outstanding debt
balance.  Berry Group’s PIK option expires in June 2012.





3.      Acquisitions





Rollpak


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 Corporation 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, and accordingly, the purchase price
has been allocated to the identifiable assets and liabilities based on estimated
fair values at the acquisition date.  The allocation is preliminary
and subject to change.





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 with
operations located in Waterloo, Quebec and Oakville, Ontario.  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.  The purchase price was funded utilizing cash on
hand from the sale-leaseback transaction discussed elsewhere in this Form
10-Q.  The MAC acquisition has been accounted for using 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 allocation is preliminary and subject to
change.





4.  Restructuring





During
February 2007, the Company conducted a facilities utilization review and
approved a plan to close a manufacturing operation within its tapes/coatings
division in Meridian, Mississippi. This facility was closed during the fourth
quarter of fiscal 2007, with certain of its operations
transferred


15


to other
facilities.





During
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
during April 2007, the Company announced that it would close the Old Covalence
corporate headquarters in Bedminster, NJ and the Company’s tapes/coatings
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 segment into one new segment called tapes/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 table
below sets forth the Company’s estimate of the total cost of the restructuring
programs, the portion recognized through December 29, 2007 and the portion
expected to be recognized in a future period:





Expected
              Total
      Costs
            
            
            Recognized
              through
              December
      29,
              2007
            
            
            To
      be Recognized
              in
      FutureSeverance
      and termination benefits
            
            $
            7.8
            
            
            $
            7.6
            
            
            $
            0.2Facility
      exit costs
            
            
            16.3
            
            
            
            13.9
            
            
            
            2.4Asset
      impairment
            
            
            18.1
            
            
            
            18.1
            
            
            
            —Other
            
            
            7.0
            
            
            
            3.0
            
            
            
            4.0Total
            
            $
            49.2
            
            
            $
            42.6
            
            
            $
            6.6





The table
below sets forth the significant components of the restructuring charges
recognized through December 29, 2007, by segment:





Tapes/
              Coatings
            
            
            Flexible
              Films
            
            
            Corporate
            
            
            Rigid
              Closed
              Top
            
            
            TotalSeverance
      and termination benefits
            
            $
            0.8
            
            
            $
            3.1
            
            
            $
            3.5
            
            
            $
            0.2
            
            
            $
            7.6Facility
      exit costs
            
            
            0.3
            
            
            
            6.8
            
            
            
            1.9
            
            
            
            4.9
            
            
            
            13.9Asset
      impairment
            
            
            3.4
            
            
            
            14.7
            
            
            
            —
            
            
            
            —
            
            
            
            18.1Other
            
            
            2.2
            
            
            
            0.4
            
            
            
            —
            
            
            
            0.4
            
            
            
            3.0Total
            
            $
            6.7
            
            
            $
            25.0
            
            
            $
            5.4
            
            
            $
            5.5
            
            
            $
            42.6





16


The table
below sets forth the activity with respect to the restructuring accrual at
September 29, 2007 and December 29, 2007:





Employee
              Severance
              and
      Benefits
            
            
            Facilities
              Exit
              Costs
            
            
            Other
            
            
            Non-cash
              Charges
            
            
            TotalBalance
      at September 30, 2006
            
            $
            ―
            
            
            $
            1.2
            
            
            $
            ―
            
            
            $
            ―
            
            
            $
            1.2Charges
            
            
            7.5
            
            
            
            11.3
            
            
            
            2.2
            
            
            
            18.1
            
            
            
            39.1Non-cash
      charges
            
            
            ―
            
            
            
            ―
            
            
            
            ―
            
            
            
            (18.1
            )
            
            
            (18.1
            )Cash
      payments
            
            
            (4.5
            )
            
            
            (2.1
            )
            
            
            (2.2
            )
            
            
            ―
            
            
            
            (8.8
            )Balance
      at September 29, 2007
            
            
            3.0
            
            
            
            10.4
            
            
            
            ―
            
            
            
            ―
            
            
            
            13.4Charges
            
            
            0.1
            
            
            
            2.6
            
            
            
            0.8
            
            
            
            ―
            
            
            
            3.5Cash
      payments
            
            
            (0.7
            )
            
            
            (0.6
            )
            
            
            ―
            
            
            
            ―
            
            
            
            (1.3
            )Balance
      at December 29, 2007
            
            $
            2.4
            
            
            $
            12.4
            
            
            $
            0.8
            
            
            $
            ―
            
            
            $
            15.6





The
employee severance and termination benefits relate to the elimination of
approximately 430 employees from the various manufacturing and administrative
facilities. The facilities exit costs include $10.8 million of anticipated lease
termination costs related to the City of Industry, Santa Fe Springs, Yonkers,
Bedminster, Shreveport and Oxnard facilities. The estimated costs are net of
expected sublease income. The asset impairment charge relates to land, building
and equipment located at each of the facilities, determined to be impaired as a
result of the decision to close those facilities.





The
restructuring costs accrued as of December 29, 2007 will result in future cash
outflows. The charges recognized in the quarter ended December 29, 2007
have been reported as restructuring expense in the consolidated statement of
operations. The remaining liability as of December 29, 2007 has been included
within accrued expenses on the consolidated balance sheet.





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:





December
      29,
                2007
            
            
            September
      29,
                2007
            
            Amortization
                PeriodDeferred
      financing fees
            
            $
            43.0
            
            
            $
            43.0
            
            Respective
      debtCustomer
      relationships
            
            
            862.2
            
            
            
            862.2
            
            11
      – 20 yearsGoodwill
            
            
            1,181.8
            
            
            
            1,132.0
            
            Indefinite
      livedTrademarks
            
            
            256.7
            
            
            
            256.7
            
            Indefinite
      livedOther
      intangibles
            
            
            53.5
            
            
            
            53.3
            
            10-20
      yearsAccumulated
      amortization
            
            
            (125.5
            )
            
            
            (105.1
            )$
            2,271.7
            
            
            $
            2,242.1





17


6.  Accrued
Expenses and Other Current Liabilities





The
following table sets forth the totals included in accrued expenses and other
current liabilities.





December
      29,
                2007
            
            
            September
      29,
                2007Employee
      compensation, payroll and other taxes
            
            $
            69.7
            
            
            $
            70.1Interest
            
            
            33.7
            
            
            
            21.7Restructuring
            
            
            15.6
            
            
            
            13.4Rebates
            
            
            39.0
            
            
            
            35.9Other
            
            
            38.7
            
            
            
            48.3$
            196.7
            
            
            $
            189.4





7.      Long-Term
Debt





Long-term
debt consists of the following:





December
      29,
              2007
            
            
            September
      29,
              2007Term
      loan
            
            $
            1,194.0
            
            
            $
            1,194.0Revolving
      line of credit
            
            
            71.0
            
            
            
            50.0Second
      Priority Senior Secured Fixed Rate Notes
            
            
            525.0
            
            
            
            525.0Second
      Priority Senior Secured Floating Rate Notes
            
            
            225.0
            
            
            
            225.011%
      Senior Subordinated Notes
            
            
            431.4
            
            
            
            428.210
      1⁄4% Senior Subordinated Notes
            
            
            265.0
            
            
            
            265.0Capital
      leases and other
            
            
            14.0
            
            
            
            23.52,725.4
            
            
            
            2,710.7Less
      current portion of long-term debt
            
            
            (17.1
            )
            
            
            (17.4
            )$
            2,708.3
            
            
            $
            2,693.3





The
current portion of long-term debt consists of $12.0 million of quarterly
installments on the term loan and $5.1 million of principal payments related to
capital lease obligations.





Senior
Secured Credit Facility


The
Company’s senior secured credit facilities consist of a term loan in the
original principal amount of $1,200 million and a $400.0 million asset based
revolving line of credit.  The availability under the revolving line
of credit is based on the lesser of $400.0 million or 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 line of
credit matures on April 3, 2013.  The interest rate on the term loan
and the line of credit were 5.25% and 5.73% at December 29, 2007,
respectively.  The line of credit is also subject to an unused
commitment fee for unused borrowing 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.  At December 29, 2007, there was $71.0 million outstanding on
the revolving credit facility.  The revolving credit facility allows
up to $100.0 million of letters of credit to be issued instead of borrowings
under the revolving credit facility. At December 29, 2007, the Company had $31.8
million under the revolving credit facility in letters of credit outstanding. At
December 29,


18


2007, the
Company had unused borrowing capacity of $297.2 million under the revolving
credit facility.  The Company was in compliance with all covenants at
December 29, 2007.





Second
Priority Senior Secured Notes


The
Company’s $750.0 million of second priority senior secured notes (“Second
Priority Notes”) are comprised of (a) $525.0 million aggregate principal amount
of 8 7/8% second priority fixed rate notes (“Fixed Rate Notes”) and (b) $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 LIBOR (5.69% at December 29, 2007) 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 Company was in compliance with all covenants at December
29, 2007.




11%
Senior Subordinated Notes


The
Company’s senior subordinated notes in the original principal amount of
$425.0 million (“11% Senior Subordinated Notes”) were sold in a private
placement to Goldman, Sachs and Co. and are exempt from registration under the
Securities Act.  The notes mature in 2016. 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 Senior
Subordinated Notes.  The Company elected to satisfy 3% of its interest
obligation ($3.2 million each) in satisfaction of its interest obligations for
its September 2007 and December 2007 interest payments. The Company was in
compliance with all covenants at December 29, 2007.




10
1⁄4% Senior Subordinated Notes


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 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
December 29, 2007.





Derivative
Instruments


In August
2007, the Company entered into two interest rate exchange agreements (“Swaps”)
that were effective on November 5, 2007.  The first agreement requires
the Company to pay a fixed rate of 4.875% on $300 million of notional
principal for two years to the counterparty.  The counterparty pays to
the Company a variable rate on the same amount of notional principal based on
the three-month London Interbank Offered Rate (“LIBOR”). The second swap
agreement requires the Company to pay a fixed rate of 4.92% on $300 million
of notional principal for three years to the same counterparty in exchange for
the same floating receipt of three-month LIBOR.  The counterparty to
this agreement is a global financial institution. The Company is exposed to
credit loss in the event of nonperformance by the counterparty to the agreement;
however, the Company considers this risk to be low.





The
Company concluded that it met the hedge accounting criteria for accounting for
these swaps.  The Company estimates the fair value of the Swaps
identified above to be a liability of $14.2 million and $4.9 million as of
December 29, 2007 and September 29, 2007, respectively, which
is


19


reflected
as a part of other long-term liabilities on the accompanying consolidated
balance sheet with an offset, net of tax, to accumulated other comprehensive
income (loss). The fair value of the Swaps is estimated by calculating the
difference between the present value of the forward LIBOR curve and the present
value of the fixed rate payments that the Company will make over the life of the
Swap agreements. The fair value is an estimate of the net amount that the
Company would be required to pay on December 29, 2007, if the agreements were
transferred to other parties or cancelled by the Company.





8.         Stockholders’
Equity and Stock Option Plans





In
connection with the Apollo Berry Merger, Apollo and Graham and certain employees
who invested in Old Berry Group entered into a stockholders
agreement.  The stockholders agreement provides for, among 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 Berry Group in certain
circumstances.





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 at the time of the Apollo Berry
Merger.  Certain of these amounts were repaid by the employees in
connection with the special one-time dividend.





In
connection with the Berry Covalence Merger, Berry 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.  On June 7, 2007,
Berry Group’s Board of Directors declared a special one-time dividend of $77 per
common share and option to shareholders of record as of June 6,
2007.  This dividend reduced Berry Group’s shareholders equity for
owned shares by $530.2 million.  The Company recorded stock
compensation expense of $4.7 million and $0.5 million for the thirteen weeks
ended December 29, 2007 and December 30, 2006, respectively.


20


9.           Comprehensive
Income (Loss)





Comprehensive
income (loss) is comprised of net loss, other comprehensive income (losses), and
gains or losses resulting from currency translations of foreign
investments.  Other comprehensive income (losses) includes unrealized
gains or losses on derivative financial instruments and available for sale
securities and minimum pension liability adjustments.  The details of
comprehensive income (losses) are as follows:





Thirteen
      Weeks EndedDecember
      29,
              2007
            
            
            December
      30,
              2006Net
      loss
            
            $
            (31.3
            )
            
            $
            (30.8
            )Other
      comprehensive income (losses)
            
            
            (5.6
            )
            
            
            0.6Currency
      translation income
            
            
            2.3
            
            
            
            1.3Comprehensive
      loss
            
            $
            (34.6
            )
            
            $
            (28.9
            )





10. Income
Taxes





The
effective tax rate was 38.6% and 37.1% for the thirteen months ended December
29, 2007 and December 30, 2006, respectively.  A reconciliation of
income tax benefit, computed at the federal statutory rate, to income tax
benefit, as provided for in the financial statements, is as
follows:





Thirteen
      Weeks EndedDecember
      29,
              2007
            
            
            December
      30,
              2006Income
      tax benefit computed at statutory rate
            
            $
            (17.9
            )
            
            $
            (18.4
            )State
      income tax benefit, net of federal taxes
            
            
            (1.1
            )
            
            
            (2.4
            )Expenses
      not deductible for income tax purposes
            
            
            0.1
            
            
            
            (0.2
            )Change
      in valuation allowance
            
            
            0.4
            
            
            
            1.6Other
            
            
            (1.2
            )
            
            
            (0.1
            )Income
      tax benefit
            
            $
            (19.7
            )
            
            $
            (19.5
            )





On
September 30, 2007, the Company adopted the Financial Accounting Standards Board
(FASB) Final Interpretation Number 48, “Accounting for Uncertainty in Income
Taxes” (FIN 48).  As of September 29, 2007, the total amount of
unrecognized income tax benefits computed under FIN 48 was $3.9
million.  This amount did not change with the adoption of FIN
48.  The impact of the unrecognized income tax benefits computed under
FIN 48, if recognized, would impact the effective income tax rate of the
Company.  As of September 30, 2007, the Company has not recorded any
material amounts for accrued interest and penalties related to uncertain tax
positions.  The Company foresees no significant changes to the facts
and circumstances underlying its reserves and allowances for uncertain income
tax positions as reasonably possible during the next 12 months.  As of
September 30, 2007, the Company is subject to unexpired statutes of limitation
for U.S. federal income taxes for the years 2001-2007.  The Company is
also subject to unexpired statutes of limitation for state income taxes ranging
for years from 2001-2007.


21


11.
Employee Retirement Plans





Thirteen
      Weeks EndedDecember
      29,
              2007
            
            
            December
      30,
              2006Components
      of net period benefit cost:Defined
      Benefit Pension PlansService cost
            
            $
            —
            
            
            $
            —Interest cost
            
            
            0.5
            
            
            
            0.5Expected return on plan
      assets
            
            
            (0.6
            )
            
            
            (0.6
            )Net periodic benefit
      cost
            
            $
            (0.1
            )
            
            $
            (0.1
            )Retiree
      Health Benefit PlanService cost
            
            $
            —
            
            
            $
            —Interest cost
            
            
            0.1
            
            
            
            0.1Recognized
      actuarial loss
            
            
            —
            
            
            
            —Net periodic benefit
      cost
            
            $
            0.1
            
            
            $
            0.1





The
Company expects to contribute approximately $2.8 million during fiscal 2008, of
which $0.2 million was made in the thirteen weeks ended December 29, 2007 to the
defined benefit pension plans and the retiree health benefit plan.





12.
Sale-leaseback Transaction





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.  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.


22


13.
Operating Segments





The
Company is organized into four reportable segments which are the Company’s
strategic business units that operate in different industries and are managed
separately. The four reportable segments include: rigid open top, rigid closed
top, flexible films and tapes/coatings.  The rigid open top segment
manufactures containers, drink cups and houseware products.  The rigid
closed top segment manufactures closures, bottles and prescription vials and
tubes.  The flexible films segment manufactures polyethylene-based
film, packaging products, bags and sheeting. The tapes/coatings segment
manufactures specialty adhesive products and tapes for industrial applications,
including external corrosion protection products for oil, gas and water
pipelines, specialty laminates and coated products principally derived from
paper, film, foil and fabrics.  More than 95% of the Company’s revenue
is in North America. In addition, more than 95% of the Company’s property and
equipment is located in North America. Selected information by reportable
segment is presented in the following table:





Thirteen
      Weeks EndedDecember
      29,
              2007
            
            
            December
      30,
              2006Net
      sales:Rigid Open Top
            
            $
            223.2
            
            
            $
            193.7Rigid Closed
Top
            
            
            148.4
            
            
            
            143.2Flexible Films
            
            
            270.4
            
            
            
            246.1Tapes/Coatings
            
            
            120.7
            
            
            
            122.1Intercompany
            
            
            —
            
            
            
            (1.5
            )Total net sales
            
            $
            762.7
            
            
            $
            703.6Operating
      income (loss):Rigid Open Top
            
            $
            10.1
            
            
            $
            15.8Rigid Closed
Top
            
            
            7.0
            
            
            
            9.5Flexible Films
            
            
            (5.6
            )
            
            
            (8.9
            )Tapes/Coatings
            
            
            (1.0
            )
            
            
            (3.1
            )Corporate
            
            
            —
            
            
            
            (5.8
            )Total operating
      income
            
            $
            10.5
            
            
            $
            7.5Depreciation
      and amortization:Rigid Open Top
            
            $
            23.3
            
            
            $
            17.0Rigid Closed
Top
            
            
            16.1
            
            
            
            11.8Flexible Films
            
            
            11.0
            
            
            
            10.8Tapes/Coatings
            
            
            9.2
            
            
            
            9.0Corporate
            
            
            —
            
            
            
            0.5Total depreciation and
      amortization
            
            $
            59.6
            
            
            $
            49.1





December
      29,
              2007
            
            
            September
      29,
              2007Total
      assets:Rigid Open Top
            
            $
            1,706.8
            
            
            $
            1,746.6Rigid Closed
Top
            
            
            1,085.1
            
            
            
            1,024.5Flexible Films
            
            
            681.2
            
            
            
            683.5Tapes/Coatings
            
            
            429.2
            
            
            
            414.8Total assets
            
            $
            3,902.3
            
            
            $
            3,869.4





23





14.            Condensed
Consolidating or Combined Financial Information





The
Company has Second Priority Fixed and Floating Rate Notes and 10 1⁄4% Senior
Subordinated Notes outstanding which are fully, jointly, severally, and
unconditionally guaranteed by 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 or
combining 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.





December
      29, 2007Parent
              Company
            
            
            Combined
              Guarantor
              Subsidiaries
            
            
            Combined
              Non-guarantor
      Subsidiaries
            
            
            Eliminations
            
            
            ConsolidatedConsolidating
      Balance SheetCurrent
      assets
            
            $
            271.9
            
            
            $
            501.9
            
            
            $
            88.5
            
            
            $
            —
            
            
            $
            862.3Net
      property and equipment
            
            
            214.1
            
            
            
            517.5
            
            
            
            34.4
            
            
            
            —
            
            
            
            766.0Other
      noncurrent assets
            
            
            2,880.7
            
            
            
            2,049.6
            
            
            
            14.1
            
            
            
            (2,670.4
            )
            
            
            2,274.0Total
      assets
            
            $
            3,366.7
            
            
            $
            3,069.1
            
            
            $
            137.0
            
            
            $
            (2,670.4
            )
            
            $
            3,902.3Current
      liabilities
            
            $
            191.5
            
            
            $
            272.2
            
            
            $
            25.8
            
            
            $
            —
            
            
            $
            489.5Noncurrent
      liabilities
            
            
            2,754.9
            
            
            
            231.1
            
            
            
            6.5
            
            
            
            —
            
            
            
            2,992.5Equity
      (deficit)
            
            
            420.3
            
            
            
            2,565.7
            
            
            
            104.7
            
            
            
            (2,670.4
            )
            
            
            420.3Total
      liabilities and equity (deficit)
            
            $
            3,366.7
            
            
            $
            3,069.0
            
            
            $
            137.0
            
            
            $
            (2,670.4
            )
            
            $
            3,902.3





September
      29, 2007Parent
              Company
            
            
            Combined
              Guarantor
              Subsidiaries
            
            
            Combined
              Non-guarantor
      Subsidiaries
            
            
            Eliminations
            
            
            ConsolidatedConsolidating
      Balance SheetCurrent
      assets
            
            $
            278.2
            
            
            $
            489.6
            
            
            $
            72.0
            
            
            $
            —
            
            
            $
            839.8Net
      property and equipment
            
            
            211.7
            
            
            
            538.9
            
            
            
            34.4
            
            
            
            —
            
            
            
            785.0Other
      noncurrent assets
            
            
            1,809.7
            
            
            
            2,007.3
            
            
            
            16.2
            
            
            
            (1,588.6
            )
            
            
            2,244.6Total
      assets
            
            $
            2,299.6
            
            
            $
            3,035.8
            
            
            $
            122.6
            
            
            $
            (1,588.6
            )
            
            $
            3,869.4Current
      liabilities
            
            $
            200.1
            
            
            $
            246.2
            
            
            $
            23.7
            
            
            $
            —
            
            
            $
            470.0Noncurrent
      liabilities
            
            
            2,726.6
            
            
            
            216.0
            
            
            
            6.8
            
            
            
            —
            
            
            
            2,949.4Equity
      (deficit)
            
            
            (627.1
            )
            
            
            2,573.6
            
            
            
            92.1
            
            
            
            (1,588.6
            )
            
            
            450.0Total
      liabilities and equity (deficit)
            
            $
            2,299.6
            
            
            $
            3,035.8
            
            
            $
            122.6
            
            
            $
            (1,588.6
            )
            
            $
            3,869.4











24





Thirteen
      Weeks Ended December 29, 2007Parent
              Company
            
            
            Combined
              Guarantor
              Subsidiaries
            
            
            Combined
              Non-guarantor
      Subsidiaries
            
            
            Eliminations
            
            
            ConsolidatedConsolidating
      Statement of OperationsNet
      sales
            
            $
            242.4
            
            
            $
            469.3
            
            
            $
            51.0
            
            
            $
            —
            
            
            $
            762.7Cost
      of goods sold
            
            
            219.0
            
            
            
            387.3
            
            
            
            47.6
            
            
            
            —
            
            
            
            653.9Gross
      profit
            
            
            23.4
            
            
            
            82.0
            
            
            
            3.4
            
            
            
            —
            
            
            
            108.8Selling
      , general, and administrative expense
            
            
            24.9
            
            
            
            52.7
            
            
            
            4.2
            
            
            
            —
            
            
            
            81.8Restructuring
      and impairment charges
            
            
            3.5
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            3.5Operating
      expenses
            
            
            9.1
            
            
            
            3.3
            
            
            
            0.6
            
            
            
            —
            
            
            
            13.0Operating
      income (loss)
            
            
            (14.1
            )
            
            
            26.0
            
            
            
            (1.4
            )
            
            
            —
            
            
            
            10.5Interest
      expense (income), net
            
            
            77.7
            
            
            
            (17.2
            )
            
            
            1.0
            
            
            
            —
            
            
            
            61.5Income
      taxes (benefit)
            
            
            0.1
            
            
            
            (20.7
            )
            
            
            0.9
            
            
            
            —
            
            
            
            (19.7
            )Net
      income (loss)
            
            $
            (91.9
            )
            
            $
            61.1
            
            
            $
            (3.3
            )
            
            $
            —
            
            
            $
            (31.3
            )





Consolidating
      Statement of Cash FlowsNet
      cash flow from operating activities
            
            $
            62.9
            
            
            $
            (48.4
            )
            
            $
            6.2
            
            
            $
            —
            
            
            $
            20.7Investing
      activities:Purchase
      of property, plant, and equipment
            
            
            (14.1
            )
            
            
            (23.7
            )
            
            
            (0.8
            )
            
            
            —
            
            
            
            (38.6
            )Proceeds
      from disposal of assets
            
            
            —
            
            
            
            82.2
            
            
            
            —
            
            
            
            —
            
            
            
            82.2Acquisition
      of business net of cash acquired
            
            
            (73.7
            )
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (73.7
            )Net
      cash flow from investing activities
            
            
            (87.8
            )
            
            
            58.5
            
            
            
            (0.8
            )
            
            
            —
            
            
            
            (30.1
            )Financing
      activities:Proceeds
      from long-term borrowings
            
            
            23.9
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            23.9Payments
      on long-term borrowings
            
            
            —
            
            
            
            (9.0
            )
            
            
            (0.5
            )
            
            
            —
            
            
            
            (9.5
            )Equity
      contributions (distributions), net
            
            
            0.2
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            0.2Net
      cash flow from financing activities
            
            
            24.1
            
            
            
            (9.0
            )
            
            
            (0.5
            )
            
            
            —
            
            
            
            14.6Effect
      of exchange rate changes on cash
            
            
            —
            
            
            
            —
            
            
            
            2.0
            
            
            
            —
            
            
            
            2.0Net
      increase (decrease) in cash and cash equivalents
            
            
            (0.8
            )
            
            
            1.1
            
            
            
            6.9
            
            
            
            —
            
            
            
            7.2Cash
      and cash equivalents at beginning of period
            
            
            0.9
            
            
            
            7.7
            
            
            
            6.0
            
            
            
            —
            
            
            
            14.6Cash
      and cash equivalents at end of period
            
            $
            0.1
            
            
            $
            8.8
            
            
            $
            12.9
            
            
            $
            3⁄4
            
            
            $
            21.8








25








Thirteen
      Weeks Ended December 30, 2006Parent
              Company
            
            
            Combined
              Guarantor
              Subsidiaries
            
            
            Combined
              Non-guarantor
      Subsidiaries
            
            
            Eliminations
            
            
            ConsolidatedCombined
      Statement of OperationsNet
      sales
            
            $
            237.1
            
            
            $
            430.6
            
            
            $
            43.4
            
            
            $
            (7.5
            )
            
            $
            703.6Cost
      of goods sold
            
            
            226.3
            
            
            
            356.5
            
            
            
            41.5
            
            
            
            (7.1
            )
            
            
            617.2Gross
      profit
            
            
            10.8
            
            
            
            74.1
            
            
            
            1.9
            
            
            
            (0.4
            )
            
            
            86.4Selling,
      general and administrative expense
            
            
            24.1
            
            
            
            50.8
            
            
            
            3.7
            
            
            
            —
            
            
            
            78.6Restructuring
      and impairment charges
            
            
            0.3
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            0.3Operating
      income (loss)
            
            
            (13.6
            )
            
            
            23.3
            
            
            
            (1.8
            )
            
            
            (0.4
            )
            
            
            7.5Other
      expense (income)
            
            
            —
            
            
            
            —
            
            
            
            0.1
            
            
            
            —
            
            
            
            0.1Interest
      expense, net
            
            
            43.0
            
            
            
            16.6
            
            
            
            0.3
            
            
            
            —
            
            
            
            59.9Income
      taxes (benefit)
            
            
            (13.3
            )
            
            
            (6.5
            )
            
            
            0.3
            
            
            
            —
            
            
            
            (19.5
            )Minority
      interest
            
            
            (2.2
            )
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (2.2
            )Equity
      in net (income) loss from subsidiary
            
            
            (10.3
            )
            
            
            2.0
            
            
            
            —
            
            
            
            8.3
            
            
            
            —Net
      income (loss)
            
            $
            (30.8
            )
            
            $
            11.2
            
            
            $
            (2.5
            )
            
            $
            (8.7
            )
            
            $
            (30.8
            )





Combined
      Statement of Cash FlowsNet
      cash flow from operating activities
            
            $
            51.0
            
            
            $
            10.4
            
            
            $
            (1.6
            )
            
            
            —
            
            
            $
            59.8Investing
      activities:Purchase
      of property, plant, and equipment
            
            
            (7.1
            )
            
            
            (6.7
            )
            
            
            (0.4
            )
            
            
            —
            
            
            
            (14.2
            )Acquisition
      of business net of cash acquired
            
            
            (30.2
            )
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (30.2
            )Net
      cash flow from investing activities
            
            
            (37.3
            )
            
            
            (6.7
            )
            
            
            (0.4
            )
            
            
            —
            
            
            
            (44.4
            )Financing
      activities:Payments
      on long-term borrowings
            
            
            (23.9
            )
            
            
            (0.1
            )
            
            
            0.6
            
            
            
            —
            
            
            
            (23.4
            )Distributions
      to Covalence Specialty Materials Holding Corporation
            
            
            (1.3
            )
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (1.3
            )Net
      cash flow from financing activities
            
            
            (25.2
            )
            
            
            (0.1
            )
            
            
            0.6
            
            
            
            —
            
            
            
            (24.7
            )Effect
      of exchange rate changes on cash
            
            
            —
            
            
            
            —
            
            
            
            (0.2
            )
            
            
            —
            
            
            
            (0.2
            )Net
      increase (decrease) in cash and cash equivalents
            
            
            (11.5
            )
            
            
            3.6
            
            
            
            (1.6
            )
            
            
            —
            
            
            
            (9.5
            )Cash
      and cash equivalents at beginning of period
            
            
            62.3
            
            
            
            15.0
            
            
            
            5.8
            
            
            
            —
            
            
            
            83.1Cash
      and cash equivalents at end of period
            
            $
            50.8
            
            
            $
            18.6
            
            
            $
            4.2
            
            
            $
            3⁄4
            
            
            $
            73.6





26





15.            Contingencies





The
Company is party to various legal proceedings involving routine claims which are
incidental to the business.  Although the legal and financial
liability with respect to such proceedings cannot be estimated with certainty,
the Company believes that any ultimate liability would not be material to the
Company’s financial condition or results of operations.





16.         Recent
Financial Accounting Standards





In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations.”  This statement replaces FASB Statement No. 141,
“Business Combinations.” This statement retains the fundamental requirements in
SFAS 141 that the acquisition method of accounting (which SFAS 141 called
the purchase method) be used for all business combinations and for an acquirer
to be identified for each business combination. This statement defines the
acquirer as the entity that obtains control of one or more businesses in the
business combination and establishes the acquisition date as the date that the
acquirer achieves control. This statement requires an acquirer to recognize the
assets acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree at the acquisition date, measured at their fair values as of that date,
with limited exceptions specified in the statement.  This statement
applies prospectively to business combinations for which the acquisition date is
on or after the beginning of the first annual reporting period beginning on or
after December 15, 2008. The Company is currently assessing the impact of the
statement.





In
September 2006, the FASB issued FASB No. 157, “Fair Value
Measurements” (“FAS 157”).  FAS 157 is definitional and
disclosure oriented and addresses how companies should approach measuring fair
value when required by GAAP; it does not create or modify any current GAAP
requirements to apply fair value accounting. The standard provides a single
definition for fair value that is to be applied consistently for all accounting
applications, and also generally describes and prioritizes according to
reliability the methods and inputs used in valuations. FAS 157 prescribes
various disclosures about financial statement categories and amounts which are
measured at fair value, if such disclosures are not already specified elsewhere
in GAAP.  The new measurement and disclosure requirements of FAS 157
are effective for the Company’s fiscal year beginning October 1, 2008.  The
Company is currently assessing the impact FAS 157 will have on its results of
operations and financial position.





In
February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities," ("SFAS No. 159"), which permits
companies to choose to measure certain financial instruments and other items at
fair value that are not currently required to be measured at fair value. SFAS
No. 159 is effective for the Company’s fiscal year beginning October 1, 2008.
 We have not determined the effect that the adoption of SFAS No. 159 will
have on our consolidated financial statements.





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements”, which is an amendment of Accounting Research
Bulletin (“ARB”) No. 51.  This statement clarifies that a
noncontrolling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements.  This statement changes the way the consolidated
income statement is presented, thus requiring consolidated net income to be
reported at amounts that include the amounts attributable to
both


27


parent
and the noncontrolling interest.  This statement is effective for the
fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2008.  Based on current conditions, we do not
expect the adoption of SFAS 160 to have a significant impact on the Company’s
results of operations or financial position.





17.         Subsequent
Events





On January
22, 2008, Berry 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 has a notional amount of $300.0 million and
swaps three month variable LIBOR contracts for a fixed three year rate of
2.962%.  This swap agreement expires on February 7, 2011.





On
February 5, 2008, Berry completed its purchase from Captive Holdings, LLC of
100% of the outstanding capital stock (the “Shares”) of Captive Holdings, Inc.,
the parent company of Captive Plastics, Inc. (“Captive”).  Pursuant to
a Stock Purchase Agreement dated December 21, 2007 and amended on January 25,
2008 (the “Purchase Agreement”), the aggregate purchase price for the Shares was
approximately $500 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. To finance the purchase of the Shares, Berry used the proceeds
of the bridge loans made pursuant to a $520.0 million bridge facility as
described in more detail on Form 8-K filed with the SEC on February 11, 2008.





28


Item
      2.


Management’s
Discussion and Analysis of Financial Condition and


Results
of Operations





Unless
the context requires otherwise, references in this Management's Discussion and
Analysis of Financial Condition and Results of Operations to “Company” refer to
Berry Plastics Corporation, references to “we,” “our” or “us” refer to Berry
Plastics Corporation together with its consolidated subsidiaries, after giving
effect to the transactions described in the next paragraph.  You
should read the following discussion in conjunction with the consolidated
financial statements of the Company and its subsidiaries and the accompanying
notes thereto, which information is included elsewhere herein.  The
Company is a wholly-owned subsidiary of Berry Plastics Group,
Inc.  This discussion contains forward-looking statements and involves
numerous risks and uncertainties, including, but not limited to, those described
in our Form 10-K filed with the SEC for the fiscal year ended September 29,
2007 section titled “Risk Factors” and other risk factors identified from
time to time in our periodic filings with the Securities and Exchange
Commission.  Our actual results may differ materially from those
contained in any forward-looking statements.  You should read the
explanation of the qualifications and limitations on these forward-looking
statements starting on page 4 of this report.





On April
3, 2007, Berry Plastics Group, Inc. (“Old Berry Group”) completed a
stock-for-stock merger (the “Berry Covalence Merger”) with Covalence Specialty
Materials Holding Corp. (“Old Covalence Holding”). The resulting company
retained the name Berry Plastics Group, Inc. (“Berry
Group”).  Immediately following the Berry Covalence Merger, Berry
Plastics Holding Corporation (“Old Berry Holding”) and Covalence Specialty
Materials Corp. (“Old Covalence”) were combined as a direct subsidiary of Berry
Group.  The resulting company retained the name Berry Plastics Holding
Corporation which was subsequently changed to Berry Plastics Corporation on
December 29, 2007 (“Berry” or the “Company”).  The combination was
accounted for as a merger of entities under common control.  We
believe the combination of these entities will provide us with significant
opportunities for growth through increasing operational efficiencies, reducing
fixed costs, optimizing manufacturing assets and improving the efficiency of
capital spending.





Critical
Accounting Policies





We
disclosed those accounting policies that we consider to be significant in
determining the amounts to be utilized for communicating our consolidated
financial position, results of operations and cash flows in the Form 10-K filed
with the SEC for the fiscal year ended September 29, 2007.  Our
discussion and analysis of our financial condition and results of operations are
based on our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United
States.  The preparation of financial statements in conformity with
these principles requires management to make estimates and assumptions that
affect amounts reported in the financial statements and accompanying
notes.  Actual results are likely to differ from these estimates, but
management does not believe such differences will materially affect our
financial position or results of operations, although no assurance can be given
as to such affect.  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
an ongoing 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,


29


current
financial and credit agency reports, and the experience of our credit
representatives.  We reserve accounts that we deem to be uncollectible
in the period 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 that our net accounts receivable
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.   Our allowance for doubtful accounts was $13.9
million and $11.3 million as of December 29, 2007 and September 29, 2007,
respectively.





Inventory
obsolescence.We
evaluate our reserve for inventory obsolescence on an ongoing 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 $13.5 million and $14.9 million as of December 29, 2007
and September 29, 2007, respectively.





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 an ongoing
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 $6.0 million and $6.7 million, including
reserves for expected medical claims incurred but not reported, as of December
29, 2007 and September 29, 2007, respectively.





Workers’ compensation
insurance.  The majority of our facilities are in 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 $6.3 million and $6.7 million as of December 29, 2007 and
September 29, 2007, respectively.





Revenue recognition.The
Company recognizes revenue in accordance with SEC Staff Accounting Bulletin No.
104, “Revenue Recognition” (“SAB 104”). Revenue from sales of products is
recognized at the time product is shipped to the customer, collectiblity is
probable and title and risk of ownership transfer to the purchaser.





Impairments of Long-Lived
Assets.  In accordance with the methodology described in
Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for 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


30


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. In accordance with the methodology described in SFAS
No. 142, “Goodwill and Other Intangible Assets”, we review our goodwill and
other indefinite lived intangible assets for impairment whenever events or
changes in circumstances indicate the carrying amount of such assets may not be
recoverable or at least annually as required by SFAS No. 142.  We
evaluate impairment of goodwill by comparing its estimated fair value to its
carrying value. We estimate fair value by computing the expected future
discounted operating cash flows based on historical result trends. The estimates
of future cash flows involve considerable management judgment and are based upon
assumptions about future operating performance. The actual cash flows could
differ from management’s estimates due to changes in business conditions,
operating performance, economic conditions and other factors. Changes in these
estimates and assumptions could materially affect the determination of fair
value. Impairment of our goodwill could significantly affect our operating
results and financial position. Goodwill totaled $1,181.8 million at
December 29, 2007.  No impairment was recorded during the thirteen
week periods ended December 29, 2007 or December 30, 2006,
respectively.





Deferred Taxes and Effective Tax
Rates. We estimate the effective tax rates and associated liabilities or
assets for each legal entity of ours in accordance with SFAS No.
109.  We use tax-planning to minimize or defer tax liabilities to
future periods. In recording effective tax rates and related liabilities and
assets, we rely upon estimates, which are based upon our interpretation of
United States, foreign, state, 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 effective tax rate 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’ effective tax rates to
reflect our best estimate for the year-to-date results and for the full
year.  As part of the effective tax rate, 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.  Our valuation allowance against
deferred tax assets was $3.1 million as of December 29, 2007 and September 29,
2007.





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 $39.0 million and
$35.9 million as of December 29, 2007 and September 29, 2007,
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


31


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.





Acquisitions





We
maintain a selective and disciplined acquisition strategy, which is focused on
improving our financial performance in the long-term, 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.





Recent
Developments





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 with
operations located in Waterloo, Quebec and Oakville, Ontario.  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 purchase price was funded utilizing cash on
hand from the sale-leaseback transaction discussed elsewhere in this Form
10-Q.  The MAC acquisition has been accounted for under the purchase
method of accounting, and accordingly, the


32


purchase
price has been allocated to the identifiable assets and liabilities based on
estimated fair values at the acquisition date.  The allocation is
preliminary and subject to change.





Acquisition
of Captive Holdings, Inc.


On
February 5, 2008, Berry completed its purchase from Captive Holdings, LLC
(“Seller”) of 100% of the outstanding capital stock (the “Shares”) of Captive
Holdings, Inc., the parent company of Captive Plastics, Inc.
(“Captive”).  Pursuant to a Stock Purchase Agreement dated December
21, 2007 and amended on January 25, 2008 (the “Purchase Agreement”), the
aggregate purchase price for the Shares was approximately $500 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.  To finance the
purchase of the Shares, Berry used the proceeds of the bridge loans made
pursuant to a $520.0 million bridge facility as described in more detail on Form
8-K filed on February 11, 2008.  For the twelve months ended December
31, 2007, Captive had net sales of $290.3 million and Adjusted EBITDA of $76.3
million.  The following table reconciles Captive’s adjusted EBITDA of
$76.3 million for the twelve months ended December 31, 2007 to net
income.





12
      months ended
              December
      31, 2007Adjusted EBITDA
            
            $
            76.3Net interest
      expense
            
            
            (25.3
            )Depreciation and
      amortization
            
            
            (16.6
            )Income tax
    expense
            
            
            (6.1
            )Business optimization
      expense
            
            
            (2.1
            )Cost synergies
            
            
            (16.0
            )Management fees
            
            
            (0.6
            )Net income
            
            $
            9.6





Results
of Operations





Comparison
of the 13 Weeks Ended December 29, 2007 (the “Quarter”) and the 13 Weeks Ended
December 30, 2006 (the “Prior Quarter”)





Net Sales.  Net
sales increased 8% to $762.7 million for the Quarter from $703.6 million for the
Prior Quarter.  This $59.1 million increase is primarily the result of
strong base business organic volume growth of 4% and 2% acquisition volume
growth.  The following discussion in this section provides a
comparison of net sales by business segment.  Net sales in the rigid
open top business increased from $193.7 million in the Prior Quarter to $223.2
million in the Quarter.  Base volume growth in the rigid open top
business, excluding net selling price decreases, was very strong at 12% driven
primarily by strong growth in dairy containers, housewares, and thermoformed and
injection drink cups.  Net sales in the rigid closed top business
increased 4% from $143.2 million in the Prior Quarter to $148.4 million in the
Quarter.  Base volume growth in the rigid closed top business,
excluding net selling price decreases, was 4% for the Quarter driven by growth
in bottles, prescription vials, and overcaps and closures.  The
flexible film business net sales increased 10% from $246.1 million in the Prior
Quarter to $270.4 million in the Quarter.  This increase of $24.3
million can be primarily attributed to the Rollpak acquisition and increased
selling prices.  Net sales in the tapes/coatings business decreased
slightly from $122.1 million in the Prior Quarter to $120.7


33


million
in the Quarter primarily driven by softness in the new home construction market
partially offset by strong volume growth in the corrosion protection
business.





Gross Profit.  Gross
profit increased by $22.4 million to $108.8 million (14% of net sales) for the
Quarter from $86.4 million (12% of net sales) for the Prior
Quarter.  This increase of $22.4 million or 26% is primarily the
result of the additional sales volume noted above and productivity improvements
in the flexible films and tapes/coatings segments as a result of realizing
synergies from the Berry Covalence Merger.  These productivity
improvements were partially offset by the timing lag of passing through
increased raw material costs to customers.  In addition, in the Prior
Quarter, an expense of $7.2 million was charged to cost of goods sold related to
the write-up and subsequent sale of finished goods inventory to fair market
value in accordance with purchase accounting.





Operating
Expenses.  Selling, general and administrative expenses
increased by $7.3 million to $81.8 million for the Quarter from $74.5 million
for the Prior Quarter primarily the result of a $4.2 million increase in stock
compensation expense in the Quarter over the Prior Quarter, $4.1 million
increase in amortization of intangible assets, and increased expenses as a
result of the organic and acquisition volume growth partially offset by
realization of synergies from the Berry Covalence
Merger.  Restructuring and impairment charges were $3.5 million in the
Quarter primarily as a result of costs incurred associated with the plant
consolidations within the flexible films segment.  Other expenses
increased from $4.1 million in the Prior Quarter to $13.0 million for the
Quarter primarily as a result of expenses associated with the integration of Old
Covalence and the corresponding achievement of synergies.





Interest Expense,
Net.  Net interest expense increased $1.6 million to $61.5
million for the Quarter from $59.9 million in the Prior Quarter primarily as a
result of increased borrowings to finance the Rollpak acquisition.





Income TaxBenefit.For the Quarter,
we recorded an income tax benefit of $19.7 million or an effective tax rate of
38.6%, which is a slight change of $0.2 million from the income
tax benefit of $19.5 million or an effective tax rate of 37.1% in the Prior
Quarter.





Net Loss.  Net loss
was $31.3 million for the Quarter compared to a net loss of $30.8 million for
the Prior Quarter for the reasons discussed above.





Liquidity
and Capital Resources





Senior
Secured Credit Facility


The
Company’s senior secured credit facilities consist of $1,200.0 million term loan
and $400.0 million asset based revolving line of credit.  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
interest rate on the term loan and the line of credit were 5.25% and 5.73% at
December 29, 2007, respectively.  The line of credit is also subject
to an unused commitment fee for unused borrowing 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.  At December 29, 2007, there was $71.0 million
outstanding on the revolving line of credit.  The revolving line of
credit allows up to $100.0 million of letters of credit to be issued instead of
borrowings under the


34


revolving
line of credit. At December 29, 2007, the Company had $31.8 million under the
revolving line of credit in letters of credit outstanding. At December 29,
2007, the Company had unused borrowing capacity of $297.2 million under the
revolving line of credit.  The Company was in compliance with all
covenants at December 29, 2007.





A key
financial metric utilized in the calculation of the first lien leverage ratio is
Adjusted EBITDA.  The following table reconciles our Adjusted EBITDA
of $496.5 million for the twelve months ended December 29, 2007 to net
loss.





12
      months ended
              December
      29, 2007Adjusted EBITDA
            
            $
            496.5Net interest
      expense
            
            
            (239.2
            )Depreciation and
      amortization
            
            
            (230.7
            )Income tax
    benefit
            
            
            88.8Loss on extinguished
      debt
            
            
            (37.3
            )Business optimization
      expense
            
            
            (39.0
            )Restructuring and
      impairment
            
            
            (42.6
            )Stock based
      compensation
            
            
            (23.8
            )Management fees
            
            
            (6.4
            )Inventory
    write-up
            
            
            (5.2
            )Minority
    interest
            
            
            0.5Pro forma synergies (Covalence
      and Rollpak)
            
            
            (69.7
            )Pro forma synergies (MAC and
      Oxnard)
            
            
            (4.9
            )Pro forma
      sale/leaseback
            
            
            6.6Pro forma MAC and Rollpak
      EBITDA
            
            
            (10.3
            )Net loss
            
            $
            (116.7
            )





For
comparison purposes, the following table reconciles our Adjusted EBITDA for the
thirteen weeks ended December 29, 2007 and December 30, 2006.





Thirteen
      Weeks EndedDecember
      29, 2007
            
            
            December
      30, 2006Adjusted EBITDA
            
            $
            91.3
            
            
            $
            76.5Net interest
      expense
            
            
            (61.5
            )
            
            
            (59.9
            )Depreciation and
      amortization
            
            
            (59.6
            )
            
            
            (49.1
            )Income tax
    benefit
            
            
            19.7
            
            
            
            19.5Business optimization
      expense
            
            
            (11.7
            )
            
            
            (10.0
            )Restructuring and
      impairment
            
            
            (3.5
            )
            
            
            —Stock based
      compensation
            
            
            (4.7
            )
            
            
            (0.5
            )Management fees
            
            
            (1.3
            )
            
            
            (0.8
            )Inventory write-up and Merger
      expense
            
            
            —
            
            
            
            (8.7
            )Minority
    interest
            
            
            —
            
            
            
            2.2Net loss
            
            $
            (31.3
            )
            
            $
            (30.8
            )





While the
determination of appropriate adjustments in the calculation of Adjusted EBITDA
is subject to interpretation under the terms of the our senior secured credit
facilities, management believes the


35


adjustments
described above are in accordance with the covenants in the senior secured
credit facilities.  Adjusted EBITDA should not be considered in
isolation or construed as an alternative to our net loss, operating cash flows
or other measures as determined in accordance with GAAP.  In addition,
other companies in our industry or across different industries may calculate
bank covenants and related definitions differently than we do, limiting the
usefulness of our calculation of Adjusted EBITDA as a comparative
measure.





Second
Priority Senior Secured Notes


The
Company’s $750.0 million of second priority senior secured notes (“Second
Priority Notes”) are comprised of (1) $525.0 million aggregate principal amount
of 8 7/8% 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 LIBOR (5.69% at December 29, 2007) 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 Company was in compliance with all covenants at December
29, 2007.




11%
Senior Subordinated Notes


The
Company’s $425.0 million in aggregate principal amount of 11% senior
subordinated notes (“11% Senior Subordinated Notes”) were sold in a private
placement to Goldman, Sachs and Co. and are exempt from registration under the
Securities Act.  The 11% Senior Subordinated Notes mature in
2016. 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 Senior Subordinated Notes.  The Company elected to satisfy 3%
of its interest obligation ($3.2 million each) in satisfaction of its interest
obligations for its September 2007 and December 2007 interest payments. The
Company was in compliance with all covenants at December 29, 2007.




10
1⁄4% Senior Subordinated Notes


The
Company’s $265.0 million in aggregate principal amount of 10 1⁄4% senior
subordinated notes (“10 1⁄4%SeniorSubordinated 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 senior subordinated notes prior to
maturity.  Interest on the 10 1⁄4% SeniorSubordinated Notes is
due semi-annually on March 1 and September 1.  The Company was in
compliance with all covenants at December 29, 2007.




Cash
Flows


Net cash
provided by operating activities was $20.7 million for the Quarter compared
$59.8 million for the Prior Quarter.  This decrease of $39.1 million
is primarily the result of a $47.1 million change in working capital partially
offset by improved operations in the Quarter.





Net cash
used for investing activities decreased from $44.4 million for the Prior Quarter
to $30.1 million for the Quarter primarily as a result of increased capital
spending and the acquisition of MAC Closures, Inc. in the Quarter partially
offset by proceeds from a sale-leaseback transaction.


36


Net cash
provided by financing activities was $14.6 million for the Quarter compared to
net cash used for financing activities of $24.7 million in the Prior
Quarter.  This change of $39.3 million can be primarily attributed to
the change in working capital discussed above.





Increased
working capital needs occur whenever we experience strong incremental demand or
a significant rise in the cost of raw material, particularly plastic
resin.  However, based on our current level of operations, we believe
that cash flow from operations and available cash, together with available
borrowings under our senior secured credit facilities, will be adequate to meet
our short-term liquidity needs over the next twelve months.  We base
such belief on historical experience and the funds available under the senior
secured credit facility.  However, we cannot predict our future
results of operations and our ability to meet our obligations involves numerous
risks and uncertainties, including, but not limited to, those described in the
“Risk Factors” section of our Form 10-K filed with the Securities and Exchange
Commission for the fiscal year ended September 29, 2007.  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 December 29, 2007, our cash balance was
$21.8 million, and we had unused borrowing capacity of $297.2 million under our
revolving line of credit.





Item
3.                        Quantitative
and Qualitative Disclosures about Market Risk





Interest
Rate Risk


We are
exposed to market risk from changes in interest rates primarily through our
senior secured credit facilities 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 December 29, 2007, $71.0 million was outstanding
on the revolving credit facility.  The net outstanding balance of the
term loan at December 29, 2007 was $1,194.0 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.




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 adjusted LIBOR rate is determined by reference to
settlement rates established for deposits in dollars in the London interbank
market for a period equal to the interest period of the applicable loan and the
maximum reserve percentages established by the Board of Governors of the U.S.
Federal Reserve to which our lenders are subject.  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.   At December 29, 2007, the LIBOR rate applicable to
the term loan and floating rate notes was 5.25% and 5.69%,
respectively.  At December 29, 2007, the LIBOR rate applicable
to


37


the
revolving line of credit was 5.73%.  If the LIBOR rate increases 0.25%
and 0.5%, we estimate an annual increase in our interest expense of $2.2 million
and $4.4 million, respectively.





On January
22, 2008, Berry 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 becomes effective February
5, 2008.  The swap agreement has a notional amount of $300.0 million
and swaps three month variable LIBOR contracts for a fixed three year rate of
2.962%.  This swap agreement expires on February 7, 2011.





Plastic
Resin Cost Risk


We are
exposed to market risk from changes in plastic resin prices that could impact
our results of operations and financial condition.  We manage our
exposure to these market risks through our normal operations with purchasing
negotiation, mechanical hedging, switching between certain resin products and,
when deemed appropriate, by using derivative financial instruments in accordance
with established policies and procedures. The derivative financial instruments
generally used are forward contracts.  The derivative financial
instruments utilized by the Company in its hedging activities are considered
risk management tools and are not used for trading purposes.





Item
4.                        Controls
and Procedures





We
maintain disclosure controls and procedures that are designed to provide
reasonable assurance to our management and board of directors regarding the
preparation and fair presentation of published financial statements. Based on an
evaluation conducted under the supervision and with the participation of the
Company’s management, including our Chief Executive Officer and our Chief
Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures as of December 29, 2007, it was determined
that those controls and procedures were not effective.





In
connection with the merger and integration of Old Berry Group and Old Covalence
Holding, the Company has not fully completed the transition from Old Covalence’s
financial system to Berry’s new financial system.  This resulted in a
not fully implemented installation of disclosure controls and procedures in one
specific area of one of the Old Covalence operating units as well as one area of
income tax accounting as it relates to the combination of the two businesses;
therefore, management’s oversight and review related to certain accounts and
analyses at one of its operating segments and the income tax provision process
was not timely or effective.  In light of the material weaknesses
described above, the Company performed additional analyses and other procedures
to ensure that the consolidated financial statements included in this Quarterly
Report were prepared in accordance with accounting principles generally accepted
in the United States ("GAAP").  These procedures included additional
testing of certain balances and accounts as of December 29, 2007 to ensure the
accuracy of the quarterly financial statements. Additionally, the Company
performed a review of its tax provision model.  As a result of these
and other expanded procedures, the Company concluded that the consolidated
financial statements included in this Quarterly Report present fairly, in all
material respects, the Company's financial position, results of operations and
cash flows for the periods presented in conformity with U.S. GAAP.





The
Company is currently transitioning and converting the legacy Old Covalence
Holding systems to the Old Berry Group systems.  Management believes
that this conversion and the transition to the Old Berry Group accounting
systems and controls will remediate the material weakness in
the


38


operating
segment financial statement close process.  The Company expects to
have this complete during fiscal 2008.  In addition, the Company has
implemented additional levels of review to ensure that their financial
statements are accurate and prepared in a timely fashion.





As a
result of the formation of Berry Holding and recent acquisitions, management
continues to evaluate resources, change and expand roles and
responsibilities of key personnel and make changes to certain processes related
to financial close, shared services and financial reporting. In connection with
the above activities, the Company continues the process of consolidating some of
its transaction processing and general accounting activities into a common
shared services transaction-processing environment. We have launched a project
to migrate multiple legacy management information and accounting systems to a
single, company wide, management information and accounting system. The
migration began in the third calendar quarter of 2007 and is scheduled to be
completed in the first calendar quarter of 2009. Once fully implemented, this
change to a shared services business model (for certain processes) along with a
single, company wide, management information and accounting system is intended
to further enhance our internal control over financial reporting and our
operating efficiencies. No other changes occurred in the Company’s internal
control over financial reporting during the Company’s most recent fiscal quarter
that materially affected, or are reasonably likely to materially affect, the
Company’s internal control over financial reporting, except as discussed in Item
4 above.





Part
II.  Other Information





Item
1.            Legal
Proceedings





There has
been no material changes in legal proceedings from the items disclosed in our
Form 10-K filed with the Securities and Exchange Commission for the fiscal year
ended September 29, 2007.





Item
1A.         Risk
Factors





You
should carefully consider the risks described in our Form 10-K filed with the
Securities and Exchange Commission for the fiscal year ended September 29,
2007, including those under the heading “Risk Factors” and other information
contained in this Quarterly Report before investing in our securities.
Realization of any of these risks could have a material adverse effect on our
business, financial condition, cash flows and results of
operations.  There were no material changes in the Company’s risk
factors since described in our Form 10-K filed with the Securities and Exchange
Commission for the fiscal year ended September 29, 2007.





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





Not Applicable





Item 3.          Defaults
Upon Senior Securities





Not Applicable


39


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





Not Applicable





Item
5.          Other
Information





Not Applicable





Item
6.          Exhibits





31.1
            Rule
      13a-14(a)/15d-14(a) Certification of the Chief Executive
      Officer





31.2
            Rule
      13a-14(a)/15d-14(a) Certification of the Chief Financial
      Officer





32.1
            Section
      1350 Certification of the Chief Executive
  Officer





32.2
            Section
      1350 Certification of the Chief Financial
  Officer


40





SIGNATURE





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





Berry Plastics
Corporation





February
11, 2008





By: /s/ James M.
Kratochvil


James M. Kratochvil




Executive
Vice President, Chief Financial Officer,


Treasurer
and Secretary (Principal Financial


and
Accounting Officer)





41