**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 June 30, 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 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
      August 13, 2007 all of the outstanding 100 shares of the Common Stock, $.01
      par
      value, of Berry Plastics Holding 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
                  Offices**Berry
                  Plastics Corporation
              Delaware
              3089
              35-1813706
              (a)Aerocon,
                  Inc.
              Delaware
              3089
              35-1948748
              (a)Berry
                  Iowa Corporation
              Delaware
              3089
              42-1382173
              (a)Berry
                  Plastics Design Corporation
              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
                  Corporation
              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 Acquisition Corporation V
              Delaware
              3089
              36-4509933
              (a)Berry
                  Plastics Acquisition Corporation VII
              Delaware
              3089
              30-0120989
              (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, Inc.
              Delaware
              3089
              95-0898810
              (a)Saffron
                  Acquisition Corporation
              Delaware
              3089
              94-3293114
              (a)Setco,
                  LLC
              Delaware
              3089
              56-2374074
              (a)Sun
                  Coast Industries, Inc.
              Delaware
              3089
              59-1952968
              (a)Tubed
                  Products, LLC
              Delaware
              3089
              56-2374082
              (a)Cardinal
                  Packaging, Inc.
              Ohio
              3089
              34-1396561
              (a)Landis
                  Plastics, Inc.
              Illinois
              3089
              36-2471333
              (a)Covalence
                  Specialty Adhesives LLC
              Delaware
              2672
              20-4104683
              (a)Covalence
                  Specialty Coatings LLC
              Delaware
              2672
              20-4104683
              (a)Rollpak
                  Acquisition Corporation
              Indiana
              3089
              03-0512845
              (a)Rollpak
                  Corporation
              Indiana
              3089
              35-1582626
              (a)




(a)
      101
      Oakley Street, Evansville, IN 47710


2


INTRODUCTION





On
      April
      3, 2007, Berry Plastics Group, Inc. (“Old Group”), parent of Berry Plastics
      Holding Corporation, was merged (the “Merger”) with another Apollo Management,
      L.P. (“Apollo”) controlled company, Covalence Specialty Materials Holding
      Corporation (“CSM Holding”). The resulting company retained the name Berry
      Plastics Group, Inc (“Group”). Immediately following the Merger, Berry Plastics
      Holding Corporation (“Old Berry”) and Covalence Specialty Materials Corp.
      (“Covalence”) were combined as a direct subsidiary of Group. The resulting
      company retained the name Berry Plastics Holding Corporation (“Berry” or the
“Company”).





For
      accounting purposes, Old Group and CSM Holding are considered entities under
      the
      common control of Apollo as defined in Emerging Issues Task Force 02-5
“Definition of Common Control in Relation to FASB Statement of Financial
      Accounting Standards No. 141, Business Combinations”. The financial statements
      of these entities are presented retroactively on a consolidated 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. Apollo
      acquired CSM Holding on February 16, 2006, and Old Group on September 20, 2006.
      As Apollo acquired Covalence first, Covalence is deemed the predecessor for
      accounting purposes. In connection with the closing of the Merger, the Company
      adopted the fiscal year-end (September) of the accounting acquirer
      (Covalence).





The
      financial data for the Company for the thirteen weeks ended June 30, 2006 and
      for the period from February 16, 2006 to June 30, 2006 include the results
      of
      operations of Covalence only. The results for the period from October 1, 2005
      to
      February 16, 2006 represent the combined results of the predecessor of
      Covalence, Tyco Plastics & Adhesives. The financial data for the Company for
      the thirteen and thirty-nine weeks ended June 30, 2007 include the consolidated
      results of operations of Covalence and the Company. The balance sheets as of
      September 30, 2006 and June 30, 2007 also represent the consolidated balance
      sheets of Covalence and the Company as of each date, respectively. Accordingly,
      the results of operations and financial position of Berry Plastics Holding
      Corporation presented in this quarterly report on Form 10-Q are not comparable
      to previous quarterly and annual reports on Form 10-Q and Form 10-K,
      respectively, for the Company or Covalence. All adjustments that management
      considers necessary for a fair presentation of Berry Plastics Holding
      Corporation’s financial position and results of operations as of the date and
      for the period indicated have been included.




On
      May 4,
      2007, the Company filed a registration statement on Form S-4, which became
      effective as of May 11, 2007, with the U.S. Securities and Exchange Commission
      (the “SEC”) to exchange Covalence’s $265 million 10 1⁄4% senior subordinated notes
      due March 1, 2016. This registration statement includes the audited supplemental
      combined financial statements of Berry Plastics Holding Corporation as of
      September 30, 2006 and for the period from February 17, 2006 to September 30,
      2006 (the period the entities were under common control) and the unaudited
      supplemental combined financial statements as of and for the thirteen weeks
      ended December 30, 2006.





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


3


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 S-4 Registration Statement filed with
                the
                Securities and Exchange Commission (“SEC”) on May 4, 2007 in the section
                titled “Risk Factors.”





Readers
      should carefully review the factors discussed in our Form S-4 filed with the
      SEC
      on May 4, 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.





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.


4


**Berry
      Plastics Holding Corporation**





**Form
      10-Q Index**





**For
      Quarterly Period Ended** **June
      30, 2007**








**Part
                  I.**
              **Financial
                  Information**
              
              Page
                No.Item
                  1.
              Financial
                  Statements:Condensed
                  Consolidated Balance Sheets
              6Condensed
                  Consolidated Statements of Operations
              8Condensed
                  Consolidated Statements of Cash Flows
              9Notes
                  to Consolidated Financial Statements
              10Item
                  2.
              Management’s
                  Discussion and Analysis ofFinancial
                  Condition and Results of Operations
              29Item
                  3.
              Quantitative
                  and Qualitative Disclosures about Market Risk
              40Item
                  4.
              Controls
                  and Procedures
              40**Part
                  II.**
              **Other
                  Information**Item
                  1.
              Legal
                  Proceedings
              41Item
                  1A.
              Risk
                  Factors
              41Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              41Item
                  3.
              Defaults
                  Upon Senior Securities
              41Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              41Item
                  5.
              Other
                  Information
              41Item
                  6.
              Exhibits
              41**Signature**
              
              
              42







5


**Part
      1. Financial Information**


Item
      1.
      Financial Statements





**Berry
      Plastics Holding Corporation**


**Condensed
      Consolidated Balance Sheets**


(In
      Millions of Dollars)


**June
                  30,**
                **2007**
              
              **September
                  30, 2006****(Unaudited)****Assets**Current
                  assets*:*Cash
                  and cash equivalents
              
              **$**
              **11.9**
              
              $
              83.1Accounts
                  receivable (less allowance for doubtful accounts of $9.3 at June
                  30, 2007
                  and $9.6 at September 30, 2006)
              
              
              **360.8**
              
              
              357.1Inventories:Finished
                  goods
              
              
              **201.8**
              
              
              238.3Raw
                  materials and work in process
              
              
              **157.5**
              
              
              166.8**359.3**
              
              
              405.1Deferred
                  income taxes
              
              
              **49.5**
              
              
              17.0Prepaid
                  expenses and other current assets
              
              
              **34.1**
              
              
              41.6Total
                  current assets
              
              
              **815.6**
              
              
              903.9Property
                  and equipment:Land
              
              
              **36.2**
              
              
              32.6Buildings
                  and improvements
              
              
              **182.9**
              
              
              177.1Equipment
                  and construction in progress
              
              
              **701.6**
              
              
              638.6**920.7**
              
              
              848.3Less
                  accumulated depreciation
              
              
              **133.8**
              
              
              31.7**786.9**
              
              
              816.6Deferred
                  financing fees, net
              
              
              **38.0**
              
              
              64.8Goodwill
              
              
              **1,129.6**
              
              
              989.2Other
                  intangible assets, net
              
              
              **1,106.8**
              
              
              1,046.2Other
                  assets
              
              
              **0.7**
              
              
              0.7**2,275.1**
              
              
              2,100.9Total
                  assets
              
              **$**
              **3,877.6**
              
              $
              3,821.4




6





**Berry
      Plastics Holding Corporation**


**Condensed
      Consolidated Balance Sheets (continued)**


(In
      Millions of Dollars)


**June
                  30,**
                **2007**
              
              **September
                  30,**
                **2006****(Unaudited)****Liabilities
                  and stockholders' equity**Current
                  liabilities:Accounts
                  payable
              
              **$**
              **230.2**
              
              $
              272.1Accrued
                  expenses and other current liabilities
              
              
              **189.4**
              
              
              173.5Current
                  portion of long-term debt
              
              
              **17.2**
              
              
              16.0Total
                  current liabilities
              
              
              **436.8**
              
              
              461.6Long-term
                  debt, less current portion
              
              
              **2,664.8**
              
              
              2,612.3Deferred
                  income taxes
              
              
              **269.8**
              
              
              249.6Other
                  long-term liabilities
              
              
              **20.8**
              
              
              23.1Total
                  liabilities
              
              
              **3,392.2**
              
              
              3,346.6Minority
                  interest
              
              
              —
              
              
              65.2Stockholders'
                  equity:Contributed
                  equity from parent, net
              
              
              **608.8**
              
              
              440.6Accumulated
                  deficit
              
              
              **(126.1**
              **)**
              
              (31.2
              )Accumulated
                  other comprehensive income
              
              
              **2.7**
              
              
              0.2Total
                  stockholders’ equity
              
              
              **485.4**
              
              
              409.6Total
                  liabilities, minority interest, and stockholders’ equity
              
              **$**
              **3,877.6**
              
              $
              3,821.4


*See
      notes to consolidated financial statements.*


7





**Berry
      Plastics Holding Corporation**


**Condensed
      Consolidated Statements of Operations**


(In
      Millions of Dollars)


**Thirteen
                  Weeks Ended****June
                  30,**
                **2007**
              
              **June
                  30,**
                **2006**
              
              **Thirty-Nine
                  Weeks Ended June 30, 2007**
              
              **February
                  17, 2006 to**
                **June
                  30,**
                **2006**
              
              **October
                  1, 2005 to February 16, 2006**(Unaudited)
              
              (Unaudited)
              
              (Unaudited)
              
              (Unaudited)
              
              (Unaudited)Net
                  sales
              
              **$**
              **807.3**
              
              $
              442.5
              
              **$**
              **2,252.5**
              
              $
              648.3
              
              $
              666.9Cost
                  of goods sold
              
              
              **667.9**
              
              
              403.9
              
              
              **1,905.0**
              
              
              587.3
              
              
              579.0Gross
                  profit
              
              
              **139.4**
              
              
              38.6
              
              
              **347.5**
              
              
              61.0
              
              
              87.9Operating
                  expenses:Selling,
                  general and administrative
              
              
              **88.6**
              
              
              47.8
              
              
              **240.0**
              
              
              58.8
              
              
              50.0Charges
                  and allocations from Tyco International, Ltd. and
                  affiliates
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              10.4Other
                  operating expenses
              
              
              **27.6**
              
              
              0.1
              
              
              **39.2**
              
              
              0.3
              
              
              0.6Operating
                  income (loss)
              
              
              **23.2**
              
              
              (9.3
              )
              
              **68.3**
              
              
              1.9
              
              
              26.9Other
                  expenses (income)
              
              
              —
              
              
              (1.0
              )
              
              —
              
              
              (0.6
              )
              
              —Interest
                  expense, net
              
              
              **59.8**
              
              
              21.0
              
              
              **178.8**
              
              
              33.2
              
              
              2.1Interest
                  expense, net - Tyco International, Ltd. and affiliates
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              5.5Loss
                  on extinguished debt
              
              
              **37.3**
              
              
              —
              
              
              **37.3**
              
              
              —
              
              
              —Income
                  (loss) before income taxes and minority interest
              
              
              **(73.9**
              **)**
              
              (29.3
              )
              
              **(147.8**
              **)**
              
              (30.7
              )
              
              19.3Income
                  tax expense (benefit)
              
              
              **(27.9**
              **)**
              
              (10.0
              )
              
              **(54.7**
              **)**
              
              (10.3
              )
              
              1.6Minority
                  interest
              
              
              —
              
              
              (0.7
              )
              
              **(2.7**
              **)**
              
              (0.7
              )
              
              —Net
                  income (loss)
              
              **$**
              **(46.0**
              **)**
              $
              (18.6
              )
              **$**
              **(90.4**
              **)**
              $
              (19.7
              )
              $
              17.7








*See
      notes to consolidated financial statements* *.*





8


**B** **erry
      Plastics Holding Corporation**


**Consolidated
      Statements of Cash Flows**


(In
      Millions of Dollars)


**Thirty-Nine
                  Weeks Ended June 30, 2007**
              
              **February
                  17, 2006 to**
                **June
                  30, 2006**
              
              **October
                  1, 2005 to February 16, 2006**(Unaudited)
              
              (Unaudited)
              
              (Unaudited)**Operating
                  activities**Net
                  income (loss)
              
              **$**
              **(90.4**
              **)**
              $
              (19.7
              )
              $
              17.7Adjustments
                  to reconcile net income (loss) to net cash provided by (used for)
                  operating activities:Depreciation
                  and amortization
              
              
              **150.6**
              
              
              27.6
              
              
              15.4Non-cash
                  interest expense
              
              
              **5.9**
              
              
              1.5
              
              
              —Provisions
                  for losses on accounts receivable and inventory
              
              
              —
              
              
              2.1
              
              
              3.5Non-cash
                  restructuring
              
              
              —
              
              
              —
              
              
              0.3Loss
                  (gain) on disposal of fixed assets
              
              
              **1.7**
              
              
              —
              
              
              (3.0
              )Non-cash
                  compensation
              
              
              **15.6**
              
              
              —
              
              
              —Minority
                  interest
              
              
              **(2.7**
              **)**
              
              (0.7
              )
              
              —Write-off
                  of deferred financing fees
              
              
              **35.5**
              
              
              —
              
              
              —Deferred
                  income taxes
              
              
              **(57.1**
              **)**
              
              (10.3
              )
              
              1.2Changes
                  in operating assets and liabilities:Accounts
                  receivable, net
              
              
              **14.7**
              
              
              (24.4
              )
              
              17.0Inventories
              
              
              **43.5**
              
              
              41.2
              
              
              (94.3
              )Prepaid
                  expenses and other assets
              
              
              **7.1**
              
              
              7.0
              
              
              (11.0
              )Due
                  to Tyco International, Ltd. and affiliates
              
              
              —
              
              
              —
              
              
              (106.7
              )Accounts
                  payable and other current liabilities
              
              
              **(10.3**
              **)**
              
              79.0
              
              
              38.5Other,
                  net
              
              
              —
              
              
              (4.1
              )
              
              2.2Net
                  cash provided by (used for) operating activities
              
              
              **114.1**
              
              
              99.2
              
              
              (119.2
              )**Investing
                  activities**Additions
                  to property and equipment
              
              
              **(67.7**
              **)**
              
              (11.6
              )
              
              (12.2
              )Proceeds
                  from disposal of assets
              
              
              **11.7**
              
              
              0.2
              
              
              3.1Acquisition
                  of business, net of cash acquired
              
              
              **(75.8**
              **)**
              
              (927.7
              )
              
              —Net
                  cash used for investing activities
              
              
              **(131.8**
              **)**
              
              (939.1
              )
              
              (9.1
              )**Financing
                  activities**Proceeds
                  from long-term borrowings
              
              
              **1,221.1**
              
              
              783.4
              
              
              —Payments
                  on long-term borrowings
              
              
              **(1,178.4**
              **)**
              
              (50.0
              )
              
              (79.4
              )Equity
                  contributions (distributions), net
              
              
              **(87.8**
              **)**
              
              197.5
              
              
              —Change
                  in Predecessor parent company investment
              
              
              —
              
              
              —
              
              
              224.2Change
                  in book overdraft
              
              
              —
              
              
              —
              
              
              (14.2
              )Debt
                  financing costs
              
              
              **(8.5**
              **)**
              
              (27.7
              )
              
              —Net
                  cash provided by (used for) financing activities
              
              
              **(53.6**
              **)**
              
              903.2
              
              
              130.6Effect
                  of exchange rate changes on cash
              
              
              **0.1**
              
              
              0.2
              
              
              (0.2
              )Net
                  increase (decrease) in cash and cash equivalents
              
              
              **(71.2**
              **)**
              
              63.5
              
              
              2.1Cash
                  and cash equivalents at beginning of period
              
              
              **83.1**
              
              
              27.0
              
              
              2.7Cash
                  and cash equivalents at end of period
              
              **$**
              **11.9**
              
              $
              90.5
              
              $
              4.8


*See
      notes to consolidated financial statements.*


9


Berry
      Plastics Holding Corporation


Notes
      to
      Consolidated Financial Statements


(In
      millions of dollars, except as otherwise noted)


(Unaudited)








**1.**  **Background
      and Nature of Operations**





Berry
      Plastics Holding Corporation manufactures and markets plastic packaging
      products, plastic film products, specialty adhesives and coated products. At
      June 30, 2007 the Company had 62 production and manufacturing facilities,
      with 54 located in the United States.





On
      April
      3, 2007, Berry Plastics Group, Inc. (“Old Group”), parent of Berry Plastics
      Holding Corporation, was merged (the “Merger”) with another Apollo Management,
      L.P. (“Apollo”) controlled company, Covalence Specialty Materials Holding
      Corporation (“CSM Holding”). The resulting company retained the name Berry
      Plastics Group, Inc. (“Group”). Immediately following the Merger, Berry Plastics
      Holding Corporation (“Old Berry”) and Covalence Specialty Materials Corp.
      (“Covalence”) were combined as a direct subsidiary of Group. The resulting
      company retained the name Berry Plastics Holding Corporation (“Berry” or the
“Company”). In connection with the closing of the Merger, the Company adopted
      the fiscal year-end (September) of the accounting acquirer
      (Covalence).





**2.**  **Basis of Presentation**





The
      accompanying unaudited consolidated financial statements of Berry have been
      prepared in accordance with accounting principles generally accepted in the
      United States (“GAAP”) for interim financial information and with 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 Group. For further information, refer to the consolidated
      financial statements and footnotes thereto included in the Company’s Form S-4
      filed with the Securities and Exchange Commission on May 4, 2007. Certain
      amounts in the prior year financial statements have been reclassified to conform
      to the current year presentation.





Prior
      to
      the Merger, Old Berry and Covalence were considered entities under the common
      control of Apollo affiliates 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 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. The accompanying financial statements
      include the following entities:





•
            
            the
                predecessor to Covalence Specialty Materials Corp., Tyco Plastics
&
                Adhesives, for the period from October 1, 2005 to February 16,
                2006






10




•
            
            the
                former Covalence Specialty Materials Corp. for the periods from February
                17, 2006 (the date of acquisition) to June 30, 2006 and October 1,
                2006 to
                June 30, 2007•
            
            the
                former Berry Plastics Holding Corporation, as of September 30, 2006
                and
                for the period from October 1, 2006 to June 30, 2007





The
      acquisitions by affiliates of Apollo of Covalence and Old Berry have both been
      accounted for by the purchase method of accounting. All intercompany
      transactions have been eliminated. In connection with the closing of the Merger
      on April 3, 2007, Old Berry and Covalence extinguished their credit facilities
      and Covalence’s Second Priority Floating Rate Notes and Berry replaced these
      borrowings with a new credit facility comprised of a $400 million asset based
      revolving line of credit and a $1.2 billion term loan (See Long-Term Debt
      footnote).





The
      financial information presented in Berry’s financial statements as of June 30,
      2007 and September 30, 2006 and for the periods from October 1, 2006 to June
      30,
      2007 and February 17, 2006 to September 30, 2006 reflects all expenses incurred
      by Berry and Covalence. Berry has recorded expense in their financial statements
      related to stock compensation of Group, management fees charged by Apollo and
      other investors to Group and income taxes for Group’s operations. Contributed
      equity from parent includes the equity from Group that was invested in Berry
      by
      Apollo and other shareholders. Berry, through its wholly-owned subsidiaries
      operates in four primary segments: open top, closed top, flexible film, 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.




**3.**
            **Merger
                and Apollo Acquisitions**





*Covalence
      Merger*





In
      connection with the Covalence Merger, Old Berry and Covalence extinguished
      their
      respective senior credit facilities and Covalence’s Second Priority Floating
      Rate Notes. The Company recognized a loss of $37.3 million related to the
      extinguishment of debt in the current quarter. In addition, the Company incurred
      transaction costs of $3.9 million, which were recorded in other expenses in
      the
      current quarter. These costs represented legal, accounting and other fees paid
      in connection with the Covalence Merger.





*Apollo
      Acquisition of CSM Holding*





On
      February 16, 2006, substantially all of the assets and liabilities of Tyco
      Plastics & Adhesives were acquired by Covalence, under a Stock and Asset
      Purchase Agreement dated December 20, 2005 and entered into among CSM Holding,
      an affiliate of Apollo Management V, L.P. and the direct parent of Covalence,
      Tyco International S.A. and Tyco Group S.a.r.l. Under the agreement, Covalence
      acquired Tyco’s businesses through the acquisition of certain equity interests
      of, and certain assets and liabilities held by direct and indirect operating
      subsidiaries of, Tyco International Ltd. (“Tyco”). The initial purchase price
      was $975.2 million, subject to working capital adjustments and was funded with
      a
      new $350.0 million term loan, $175.0 million of Second Priority Floating Rate
      Notes, $265.0 million of 10 1⁄4% Senior Subordinated Notes and an equity
      contribution of approximately $197.5 million. Covalence has performed an
      evaluation of the fair values of the real and personal property, inventory
      and
      certain identifiable intangible assets in connection with the




11


purchase
      price allocation related to the acquisition. A valuation study was undertaken,
      which supports the purchase price allocation. The valuation study resulted
      in a
      fair value step-up to real and personal property, inventory and certain
      identifiable intangible assets. Covalence recognized $6.8 million as a charge
      to
      cost of sales relating to the sale of inventory that was stepped-up to fair
      value for this acquisition. Based on the valuation study and other available
      information, Covalence has recorded a purchase price of $916.1 million, which
      includes $975.2 million of original purchase price partially offset by favorable
      working capital adjustments from Tyco of approximately $63.6 million and $25.5
      million and an unfavorable post-closing working capital adjustment of $30.0
      million that was paid to Tyco. Covalence incurred a $3.7 million charge related
      to a loss on extinguished debt for bridge financing fees arranged to fund the
      acquisition that were not utilized. The following table summarizes the
      allocation of fair values of the Company’s assets acquired and liabilities
      assumed at the date of acquisition.


**February
                  16, 2006**Current
                  assets
              
              
              $
              429.0Property,
                  plant and equipment
              
              
              
              345.4Goodwill.
              
              
              
              4.0Intangible
                  assets.
              
              
              
              364.4Deferred
                  financing fees and other non-current assets
              
              
              
              24.1Assets
                  acquired
              
              
              
              1,166.9Current
                  liabilities.
              
              
              
              183.7Non
                  current liabilities
              
              
              
              67.1Liabilities
                  assumed.
              
              
              
              250.8$
              916.1




*Apollo
      Acquisition of Berry*





On
      September 20, 2006, BPC Acquisition Corp. merged with and into BPC Holding
      Corporation pursuant to an agreement and plan of merger (the “Berry Merger”),
      dated June 28, 2006, with BPC Holding Corporation continuing as the surviving
      corporation. Following the consummation of the Merger, BPC Holding Corporation
      changed its name to Berry Plastics Holding Corporation (“Old Berry”). Pursuant
      to the Berry Merger, Old Berry is a wholly-owned subsidiary of Old 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 Management,
      L.P. (the “Buyer”), which is a private equity


12


firm.
      Graham Berry Holdings, L.P. is an affiliate of Graham Partners, Inc. (“Graham”),
      a private equity firm.





The
      total
      amount of funds required to consummate the Berry Merger and to pay fees was
      $2.4
      billion. The Berry Merger was primarily funded with (1) the issuance of $750.0
      million aggregate principal amount of second priority senior secured notes,
      (2)
      new borrowings of $675.0 million in Term B loans, (3) the issuance of
      $425.0 million aggregate principal amount of senior subordinated notes, and
      (4)
      contributed equity. The Berry Merger 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. A valuation study was undertaken, which supports the purchase
      price allocation. The allocation is preliminary and is subject to change. The
      Company is amortizing its definite lived intangible assets over a
      weighted-average life of 20 years. The following table summarizes the allocation
      of purchase price and the estimated fair values of the assets acquired and
      liabilities assumed at the date of the acquisition.





**September
                20,**
              **2006**Current
                assets
            
            $
            389.3Property
                and equipment
            
            
            473.2Goodwill
            
            
            993.7Customer
                relationships
            
            
            511.9Trademarks
            
            
            182.2Other
                intangibles
            
            
            59.0Total
                assets
            
            
            2,609.3Current
                liabilities
            
            
            202.1Long-term
                liabilities
            
            
            2,103.3Total
                liabilities
            
            
            2,305.4Net
                assets acquired
            
            $
            303.9





*Acquisition
      of Minority Interest of Old Berry and Covalence*





On
      April
      3, 2007, shares of Old Group and CSM Holding were exchanged for shares in Group.
      The minority shareholders and management held ownership interests of 28% and
      4%
      for Old Group and CSM Holding, respectively. The acquisition of these ownership
      interests was accounted for under the purchase method of accounting and
      pushed-down to the Company. The following table summarizes the step-up to fair
      value of the assets acquired and liabilities assumed at the date of acquisition
      based upon the percentage ownership acquired from the minority shareholders.




13






**April
                3,****2007**Current
                assets
            
            $
            2.6Fixed
                assets
            
            
            7.9Intangible
                assets
            
            
            101.0Goodwill
            
            
            106.2Total
                assets
            
            
            217.7Deferred
                income taxes
            
            
            (44.8
            )Other
                liabilities
            
            
            0.5Total
                liabilities
            
            
            (44.3
            )Net
                assets stepped-up
            
            $
            173.4





As
      a
      result of the exchange of minority interest shares, stockholders’ equity was
      adjusted by $236.1 million, consisting of the $173.4 million step-up to fair
      value of net assets and a $62.7 million reclassification from minority interest
      to stockholders’ equity. Additionally, $0.2 million and $4.5 million of
      accumulated other comprehensive income and accumulated deficit, respectively,
      were reclassified to recognize an accumulated negative basis by minority
      interest holders whose shares were exchanged.





Of
      the
      $101.0 million of acquired intangible assets, approximately $67.4 million was
      assigned to customer relationships, $34.8 million to tradenames and a $1.2
      million reduction was assigned to patents. The acquired definite-lived
      intangible assets will be amortized over a weighted average useful life of
      20
      years. The Company allocated the goodwill between its open top and closed top
      segments. None of this goodwill is expected to be deductible for tax purposes.





**4.
      Recent Acquisition and Disposal**





*Acquisition
      of 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. 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 is subject to change.





*Sale
      of UK Operations*





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


14


**5.
      Restructuring and Other Expenses**




*Coatings
      Reorganization*





On
      February 6, 2007, Covalence announced a restructuring program in its Coatings
      division. The planned actions relate to the exiting of two product lines, the
      closure of a manufacturing facility, the termination of certain employees and
      the relocation of certain operations. The business that is in the process of
      being exited accounts for less than $25.0 million of annual net sales. During
      the quarter ended March 30, 2007, the Company recorded charges of $3.9 million
      which was comprised of $3.4 million of asset impairments, $0.2 million of
      severance and $0.3 million of relocation and other restructuring charges. In
      the
      quarter ended June 30, 2007, the Company recorded additional charges of $0.4
      million for severance and $1.0 million for equipment and employee relocation
      and
      other restructuring charges. These charges are included in other operating
      expenses on the income statement.





*Covalence
      Reorganization*





In
      connection with the Merger on April 3, 2007, the Company announced that it
      would
      close the Covalence corporate headquarters in Bedminster, NJ and the Company’s
      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. In connection
      with
      these changes, the Company recorded severance charges in the quarter ended
      June
      30, 2007 of $3.0 million and lease termination charges of $1.9 million. These
      costs are included in other operating expenses in the income statement. The
      Company has substantially completed this reorganization as of June 30,
      2007.




*Shut-down
      of Oxnard, California Facility*





On
      April
      26, 2007, the Company announced its intention to shut down its manufacturing
      facility located in Oxnard, California. The Company has stopped all production
      in the facility and is in the process of moving the equipment and inventory
      to
      other Berry locations. The Company intends to complete this move by December
      31,
      2007. The Company had previously established a reserve of $1.2 million for
      the
      shutdown of the Oxnard facility in connection with the Kerr Group acquisition.
      This accrual included estimates for severance and lease termination costs.
      The
      Company recorded an additional charge of $4.0 million for severance and lease
      termination costs in the quarter ended June 30, 2007. In addition, the Company
      recorded other restructuring charges related to equipment and inventory
      relocation and other operating costs of the facility of approximately $1.5
      million in the quarter ended June 30, 2007. These restructuring charges are
      included in other operating expenses in the income statement.




15


Activity
      for the restructuring reserves is as follows:




**Employee**
              **Severance**
              **and
                Benefits**
            
            **Facilities**
              **Exit**
              **Costs**
            
            **Other**
            
            **Non-cash**
              **Charges**
            
            **Total**Balance
                at September 30, 2005
            
            $
            2.2
            
            $
            1.6
            
            $
            ―
            
            $
            ―
            
            $
            3.8Charges
            
            
            ―
            
            
            0.6
            
            
            ―
            
            
            ―
            
            
            0.6Utilization
            
            
            ―
            
            
            (0.6
            )
            
            ―
            
            
            ―
            
            
            (0.6
            )Balance
                at February 16, 2006
            
            
            2.2
            
            
            1.6
            
            
            ―
            
            
            ―
            
            
            3.8Charges
            
            
            ―
            
            
            0.7
            
            
            ―
            
            
            ―
            
            
            0.7Utilization
            
            
            (0.9
            )
            
            (1.5
            )
            
            ―
            
            
            ―
            
            
            (2.4
            )Transferred
                to Tyco
            
            
            (1.3
            )
            
            ―
            
            
            ―
            
            
            ―
            
            
            (1.3
            )Balance
                at June 30, 2006
            
            $
            ―
            
            $
            0.8
            
            $
            ―
            
            $
            ―
            
            $
            0.8Balance
                at September 30, 2006
            
            $
            ―
            
            $
            0.7
            
            $
            ―
            
            $
            ―
            
            $
            0.7Charges
            
            
            3.7
            
            
            7.3
            
            
            0.3
            
            
            3.4
            
            
            14.7Utilization
            
            
            (0.4
            )
            
            (2.4
            )
            
            ―
            
            
            ―
            
            
            (2.8
            )Balance
                at June 30, 2007
            
            $
            3.3
            
            $
            5.6
            
            $
            0.3
            
            $
            3.4
            
            $
            12.6





*Middlesex
      Flood*





The
      Company experienced a flood at its Middlesex, NJ facility during the quarter
      ended June 30, 2007. The Company incurred costs of approximately $1.5 million
      related to the flood which included the write-off of damaged inventory of $0.3
      million, equipment repairs of $0.7 million, and other costs of $0.5 million.
      These costs are included in other operating expenses for the quarter ended
      June
      30, 2007.





**6.**  **Long-Term
      Debt**





Long-term
      debt consists of the following:


**June
                  30,**
                **2007**
              
              **September
                  30, 2006**Term
                  loans
              
              **$**
              **1,197.0**
              
              $
              974.3Revolving
                  line of credit
              
              
              **20.0**
              
              
              20.0Second
                  Priority Senior Secured Fixed Rate Notes
              
              
              **525.0**
              
              
              525.0Second
                  Priority Senior Secured Floating Rate Notes
              
              
              **225.0**
              
              
              225.0Second
                  Priority Floating Rate Notes - Retired
              
              
              —
              
              
              175.010
                  1⁄4% Senior Subordinated Notes
              
              
              **265.0**
              
              
              265.011%
                  Senior Subordinated Notes
              
              
              **425.0**
              
              
              425.0Capital
                  leases and other
              
              
              **25.0**
              
              
              19.0**2,682.0**
              
              
              2,628.3Less
                  current portion of long-term debt
              
              
              **17.2**
              
              
              16.0**$**
              **2,664.8**
              
              $
              2,612.3





The
      current portion of long-term debt consists of $12.0 million of quarterly
      installments on the term loans and $5.2 million of principal payments related
      to
      capital lease obligations.


16





*Senior
      Secured Credit Facility*





In
      connection with the Merger, the Company entered into senior secured credit
      facilities that include a term loan in the principal amount of $1,200.0 million
      and a revolving credit facility which provides borrowing availability equal
      to
      the lesser of (a) $400.0 million or (b) the borrowing base, which is a function,
      among other things, of the Company’s accounts receivable and inventory. The term
      loan matures on April 3, 2015 and the revolving credit facility matures on
      April
      3, 2013.





The
      borrowings under the senior secured credit facilities bear interest at a rate
      equal to an applicable margin plus, as determined at our option, either (a)
      a
      base rate (“Base Rate”) determined by reference to the higher of (1) the prime
      rate of Credit Suisse, Cayman Islands Branch, as administrative agent, in the
      case of the term loan facility or Bank of America, N.A., as administrative
      agent, in the case of the revolving credit facility and (2) the U.S. federal
      funds rate plus 1/2 of 1% or (b) a eurodollar rate (“LIBOR”) determined by
      reference to the costs of funds for eurodollar deposits in dollars in the London
      interbank market for the interest period relevant to such borrowing Bank
      Compliance for certain additional costs. The initial applicable margin for
      LIBOR
      rate borrowings under the revolving credit facility was 1.25% and under the
      term
      loan was 2.00%. The initial applicable margin for base rate borrowings under
      the
      revolving credit facility was 0% and under the term loan was 1.00%.





The
      term
      loan facility requires minimum quarterly principal payments of $3.0 million
      for
      the first eight years, which commenced in June 2007, with the remaining amount
      payable on April 3, 2015. In addition, the Company must prepay the outstanding
      term loan, subject to certain exceptions, with (1) beginning with the Company’s
      first fiscal year after the closing, 50% (which percentage is subject to a
      minimum of 0% upon the achievement of certain leverage ratios) of excess cash
      flow (as defined in the credit agreement); and (2) 100% of the net cash proceeds
      of all non-ordinary course asset sales and casualty and condemnation events,
      if
      the Company does not reinvest or commit to reinvest those proceeds in assets
      to
      be used in its business or to make certain other permitted investments within
      15
      months, subject to certain limitations.





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





The
      Company may voluntarily repay outstanding loans under the senior secured credit
      facilities at any time without premium or penalty, other than customary
“breakage” costs with respect to eurodollar loans. The senior secured credit
      facilities contain various restrictive covenants that, among other things and
      subject to specified exceptions, prohibit the Company from prepaying other
      indebtedness, and restrict its ability to incur indebtedness or liens, make
      investments or declare or pay any dividends. All obligations under the senior
      secured credit facilities are unconditionally guaranteed by Group and, subject
      to certain exceptions, each of the Company’s existing and future direct and
      indirect domestic subsidiaries. The guarantees of those obligations are secured
      by substantially
      all of the Company’s assets as well as those of each domestic subsidiary
      guarantor. The Company was in compliance with all the financial and operating
      covenants at June 30, 2007.


17





At
      June
      30, 2007, there was $20.0 million outstanding on the revolving credit facility.
      The revolving credit facility allows up to $50.0 million of letters of credit
      to
      be issued instead of borrowings under the revolving credit facility. At June
      30,
      2007, the Company had $29.4 million under the Credit Facility in letters of
      credit outstanding. At June 30, 2007, the Company had unused borrowing capacity
      of $350.6 million under the revolving line of credit.





*Second
      Priority Senior Secured Notes*





On
      September 20, 2006, the Company issued $750.0 million of second priority senior
      secured notes (“Second Priority Notes”) comprised of (1) $525.0 million
      aggregate principal amount of 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 a rate of LIBOR plus 3.875% per annum, which resets quarterly.
      Interest on the Floating Rate Notes is payable quarterly on March 15,
      June 15, September 15 and December 15 of each year.





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





On
      or
      after September 15, 2010 and 2008, the Company may redeem some or all of the
      Fixed Rate Notes and Floating Rate Notes, respectively, at specified redemption
      prices. Additionally, on or prior to September 15, 2009 and 2008, we may redeem
      up to 35% of the aggregate principal amount of the Fixed Rate Notes and Floating
      Rate Notes, respectively, with the net proceeds of specified equity offerings
      at
      specified redemption prices. If a change of control occurs, the Company must
      give holders of the Second Priority Notes an opportunity to sell their notes
      at
      a purchase price of 101% of the principal amount plus accrued and unpaid
      interest. The Company was in compliance with all covenants at June 30,
      2007.




*1* *0
1⁄4%
      Senior Subordinated Notes*





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




The
      indenture relating to the notes contain a number of covenants that, among other
      things and subject to certain exceptions, restrict the Company’s ability and the
      ability of its restricted subsidiaries to incur indebtedness or issue
      disqualified stock or preferred stock, pay dividends or




18


redeem
      or
      repurchase stock, make certain types of investments, sell assets, incur certain
      liens, restrict dividends or other payments from subsidiaries, enter into
      transactions with affiliates and consolidate, merge or sell all or substantially
      all of the Company’s assets. The Company was in compliance with all covenants at
      June 30, 2007.




*11%* *Senior
      Subordinated Notes*





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




The
      Senior Subordinated Notes may be redeemed at the Company’s option under
      circumstances and at redemption prices set forth in the indenture. Upon the
      occurrence of a change of control, the Company is required to offer to
      repurchase all of the Senior Subordinated Notes. The indenture sets forth
      covenants and events of default that are substantially similar to those set
      forth in the indenture governing the Second Priority Notes. The Senior
      Subordinated Notes contain additional affirmative covenants and certain
      customary representations, warranties and conditions. The Company was in
      compliance with all covenants at June 30, 2007.




**7.**  **Stockholders’
      Equity and Stock** **Option Plans**





On
      June
      7----, 2007, Group’s Board of Directors declared a special one-time dividend of
      $77 per common share to shareholders of record as of June 6, 2007. The dividend
      was paid June 8, 2007, which reduced Group’s shareholders’ equity for owned
      shares by approximately $530.2 million. In connection with this dividend,
      the Company paid a dividend of approximately $87.0 million to Group. This
      dividend is reflected as a reduction of Contributed equity from
      parent.


19


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





During
      the third quarter, the Group also clarified the anti-dilution provisions of
      its stock option plans to require payment of special dividends to holders of
      outstanding stock options. In connection with the $77 per share dividend paid
      during the quarter, holders of vested stock options received $13.7 million,
      while an additional $34.5 million will be paid to nonvested option holders
      on
      the second anniversary of the dividend grant date (assuming the nonvested option
      holders remain employed by the Company).





This
      resulted in the immediate expensing of $13.7 million related to the payment
      of
      dividends on vested awards, less $0.8 million that was expensed in prior
      periods, and will result in $34.5 million of additional expense that will be
      recognized over the two-year service period beginning June 8, 2007.





**8.**  **Comprehensive
      Income (Loss)**





Comprehensive
      income (loss) is comprised of net income (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 Ended****June
                30,**
              **2007**
            
            **June
                30,**
              **2006**
            
            **Thirty-Nine
                Weeks Ended June 30,**
              **2007**
            
            **February
                17, 2006 to**
              **June
                30, 2006**
            
            **October
                1, 2005 to**
              **February
                16, 2006**Net
                income (loss)
            
            **$**
            **(4****6.0**
            **)**
            $
            (18.6
            )
            
            **(90.4**
            **)**
            $
            (19.7
            )
            $
            17.7Other
                comprehensive income (losses)
            
            
            **0.5**
            
            
            —
            
            
            **1.1**
            
            
            —
            
            
            —Currency
                translation income (losses)
            
            
            **0.3**
            
            
            —
            
            
            **1.2**
            
            
            —
            
            
            1.7Comprehensive
                income (losses)
            
            **$**
            **(****45.2**
            **)**
            $
            (18.6
            )
            **$**
            **(88.1**
            **)**
            $
            (19.7
            )
            $
            19.4





**9.**  **Income
      Taxes**





The
      effective tax rate was 38% and 34% for the thirteen months ended June 30, 2007
      and June 30, 2006, respectively. A
      reconciliation of income tax expense, computed at the federal statutory rate,
      to
      income tax expense, as provided for in the financial statements, is as
      follows:






20


**Thirteen
                  Weeks Ended****June
                  30,**
                **2007**
              
              **June
                  30,**
                **2006**
              
              **Thirty-Nine
                  Weeks Ended June 30,**
                **2007**
              
              **February
                  17, 2006 to**
                **June
                  30, 2006**
              
              **October
                  1, 2005 to**
                **February
                  16, 2006**Income
                  tax expense (benefit) computed at
                statutory
                  rate
              
              **$**
              **(25.9**
              **)**
              $
              (10.2
              )
              **$**
              **(51.7**
              **)**
              $
              (10.7
              )
              $
              6.8State
                  income tax expense (benefit), net of
                federal
                  taxes
              
              
              **(3.6**
              **)**
              
              (1.2
              )
              
              **(5.9**
              **)**
              
              (1.2
              )
              
              **—**Expenses
                  not deductible for income tax
                purposes
              
              
              **0.2**
              
              
              0.2
              
              
              **0.6**
              
              
              0.2
              
              
              **—**U.S.
                  partnership income taxed at the
                partner
                  level
              
              
              **—**
              
              
              **—**
              
              
              **—**
              
              
              **—**
              
              
              (6.8
              )Non-U.S.
                  earnings
              
              
              **—**
              
              
              **—**
              
              
              **—**
              
              
              **—**
              
              
              1.6Change
                  in valuation allowance
              
              
              **—**
              
              
              0.4
              
              
              **0.9**
              
              
              0.5
              
              
              **—**Other
              
              
              **1.4**
              
              
              0.8
              
              
              **1.4**
              
              
              0.9
              
              
              **—**Income
                  tax expense (benefit)
              
              **$**
              **(27.9**
              **)**
              $
              (10.0
              )
              **$**
              **(54.7**
              **)**
              $
              (10.3
              )
              $
              1.6







**10** **.**  **Employee
      Retirement Plans**





**Thirteen
                Weeks Ended****June 30, 2007**
            
            **Thirty-Nine
                Weeks Ended****June 30, 2007**Components
                of net period benefit cost:Defined
                Benefit Pension PlansService
                cost
            
            **$**
            **0.1**
            
            **$**
            **0.2**Interest
                cost
            
            
            **0.5**
            
            
            **1.7**Expected
                return on plan assets
            
            
            **(0.6**
            **)**
            
            **(2.0**
            **)**Net
                periodic benefit cost
            
            **$**
            **—**
            
            **$**
            **(0.1**
            **)**Retiree
                Health Benefit PlanService
                cost
            
            **$**
            **—**
            
            **$**
            **—**Interest
                cost
            
            
            **0.1**
            
            
            **0.3**Recognized
                actuarial loss
            
            
            **—**
            
            
            **—**Net
                periodic benefit cost
            
            **$**
            **0.1**
            
            **$**
            **0.3**







The
      Company e xpects
      to
      contribute approximately $3.0 million during fiscal 2007, of which $0.3 million
      and $2.3 million was made in the thirteen weeks and thirty-nine weeks ended
      June
      30, 2007, respectively, to the defined benefit pension plans and the retiree
      health benefit plan.


21


11.  Operating
      Segments





In
      connection with the closing of the Covalence Merger, Berry
      organized its operations into four reportable segments: open top, closed top,
      flexible films, and tapes/coatings.





**Thirteen
                Weeks Ended****June
                30,**
              **2007**
            
            **June
                30,**
              **2006**
            
            **Thirty-Nine
                Weeks Ended**
              **June
                30, 2007**
            
            **February
                17, 2006 to June 30,**
              **2006**
            
            **October
                1, 2005 to February 16, 2006**Net
                sales:Open
                Top
            
            **$**
            **240.0**
            
            $
            —
            
            **$**
            **643.1**
            
            $
            —
            
            $
            —Closed
                Top
            
            
            **152.0**
            
            
            —
            
            
            **450.3**
            
            
            —
            
            
            —Flex
                Film
            
            
            **275.6**
            
            
            284.3
            
            
            **761.0**
            
            
            412.5
            
            
            449.5Tapes/Coatings
            
            
            **139.7**
            
            
            160.8
            
            
            **401.8**
            
            
            239.7
            
            
            221.4Intercompany
            
            
            **—**
            
            
            (2.6
            )
            
            **(3.7**
            **)**
            
            (3.9
            )
            
            (4.0
            )Total
                net sales
            
            **$**
            **807.3**
            
            $
            442.5
            
            **$**
            **2,252.5**
            
            $
            648.3
            
            $
            666.9Operating
                income (loss):Open
                Top
            
            **$**
            **20.8**
            
            $
            —
            
            **$**
            **67.2**
            
            $
            —
            
            $
            —Closed
                Top
            
            
            **11.4**
            
            
            —
            
            
            **34.3**
            
            
            —
            
            
            —Flex
                Film
            
            
            **10.9**
            
            
            (3.6
            )
            
            **3.8**
            
            
            0.7
            
            
            22.8Tapes/Coatings
            
            
            **(0.6**
            **)**
            
            6.0
            
            
            **(5.8**
            **)**
            
            14.3
            
            
            9.7Corporate
            
            
            **(19.3**
            **)**
            
            (11.7
            )
            
            **(31.2**
            **)**
            
            (13.1
            )
            
            (5.6
            )Total
                operating income (loss)
            
            **$**
            **23.2**
            
            $
            (9.3
            )
            **$**
            **68.3**
            
            $
            1.9
            
            $
            26.9Depreciation
                and amortization:Open
                Top
            
            **$**
            **17.0**
            
            $
            —
            
            **$**
            **47.1**
            
            $
            —
            
            
            —Closed
                Top
            
            
            **14.3**
            
            
            —
            
            
            **41.8**
            
            
            —
            
            
            —Flex
                Film
            
            
            **12.1**
            
            
            11.2
            
            
            **34.3**
            
            
            13.9
            
            
            9.4Tapes/Coatings
            
            
            **8.4**
            
            
            9.3
            
            
            **26.2**
            
            
            11.0
            
            
            5.9Corporate
            
            
            **0.2**
            
            
            2.7
            
            
            **1.2**
            
            
            2.7
            
            
            0.1Total
                depreciation and amortization
            
            **$**
            **52.0**
            
            $
            23.2
            
            **$**
            **150.6**
            
            $
            27.6
            
            $
            15.4








**June
                30,**
              **2007**
            
            **September
                30, 2006**Total
                assets:Open
                Top
            
            **$**
            **1,699.4**
            
            $
            1,950.8Closed
                Top
            
            
            **1,175.0**
            
            
            666.9Flex
                Film
            
            
            **567.2**
            
            
            676.9Tapes/Coatings
            
            
            **436.0**
            
            
            449.9Corporate
            
            
            —
            
            
            76.9Total
                assets
            
            **$**
            **3,877.6**
            
            $
            3,821.4


22


**12.**  **Condensed
      Consolidating Financial Information**





The
      Company, a wholly owned subsidiary of Group, 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 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.


**June
                  30, 2007**Parent
                Company
              
              Combined
                  GuarantorSubsidiaries
              
              Combined
                Non-guarantorSubsidiaries
              
              Eliminations
              
              Consolidated**Consolidating
                  Balance Sheet**Current
                  assets
              
              $
              248.7
              
              $
              502.2
              
              $
              64.7
              
              $
              —
              
              $
              815.6Net
                  property and equipment
              
              
              215.9
              
              
              536.7
              
              
              34.3
              
              
              —
              
              
              786.9Other
                  noncurrent assets
              
              
              2,805.9
              
              
              2,012.6
              
              
              17.2
              
              
              (2,560.6
              )
              
              2,275.1Total
                  assets
              
              $
              3,270.5
              
              $
              3,051.5
              
              $
              116.2
              
              $
              (2,560.6
              )
              $
              3,877.6Current
                  liabilities
              
              $
              192.5
              
              $
              221.7
              
              $
              22.6
              
              $
              —
              
              $
              436.8Noncurrent
                  liabilities
              
              
              2,592.6
              
              
              315.1
              
              
              47.7
              
              
              —
              
              
              2,955.4Equity
                  (deficit)
              
              
              485.4
              
              
              2,514.7
              
              
              45.9
              
              
              (2,560.6
              )
              
              485.4Total
                  liabilities and equity (deficit)
              
              $
              3,270.5
              
              $
              3,051.5
              
              $
              116.2
              
              $
              (2,560.6
              )
              $
              3,877.6


**September
                  30, 2006**Parent
                  Company
              
              Combined
                  GuarantorSubsidiaries
              
              Combined
                Non-guarantorSubsidiaries
              
              ConsolidatingAdjustments
              
              Consolidated**Consolidating
                  Balance Sheet**Current
                  assets
              
              $
              355.6
              
              $
              478.3
              
              $
              70.0
              
              $
              —
              
              $
              903.9Net
                  property and equipment
              
              
              219.4
              
              
              556.5
              
              
              40.7
              
              
              —
              
              
              816.6Other
                  noncurrent assets
              
              
              2,253.7
              
              
              216.8
              
              
              7.7
              
              
              (377.3
              )
              
              2,100.9Total
                  assets
              
              $
              2,828.7
              
              $
              1,251.6
              
              $
              118.4
              
              $
              (377.3
              )
              $
              3,821.4Current
                  liabilities
              
              $
              (286.9
              )
              $
              673.5
              
              $
              70.6
              
              $
              4.4
              
              $
              461.6Noncurrent
                  liabilities
              
              
              2,706.1
              
              
              238.3
              
              
              5.8
              
              
              —
              
              
              2,950.2Equity
                  (deficit)
              
              
              409.5
              
              
              339.8
              
              
              42.0
              
              
              (381.7
              )
              
              409.6Total
                  liabilities and equity (deficit)
              
              $
              2,828.7
              
              $
              1,251.6
              
              $
              118.4
              
              $
              (377.3
              )
              $
              3,821.4




23


**Thirteen
                  Weeks Ended June 30, 2007**ParentCompany
              
              Combined
                  GuarantorSubsidiaries
              
              Combined
                Non-guarantorSubsidiaries
              
              ConsolidatingAdjustments
              
              Consolidated**Consolidating
                  Statement of Operations**Net
                  sales
              
              $
              248.9
              
              $
              506.3
              
              $
              52.1
              
              $
              —
              
              $
              807.3Cost
                  of goods sold
              
              
              215.6
              
              
              405.7
              
              
              46.6
              
              
              —
              
              
              667.9Gross
                  profit
              
              
              33.3
              
              
              100.6
              
              
              5.5
              
              
              —
              
              
              139.4Operating
                  expenses
              
              
              45.4
              
              
              67.3
              
              
              3.5
              
              
              —
              
              
              116.2Operating
                  income (loss)
              
              
              (12.1
              )
              
              33.3
              
              
              2.0
              
              
              —
              
              
              23.2Interest
                  expense (income), net
              
              
              65.0
              
              
              (5.9
              )
              
              0.7
              
              
              —
              
              
              59.8Loss
                  on extinguished debt
              
              
              15.4
              
              
              21.9
              
              
              —
              
              
              —
              
              
              37.3Income
                  taxes (benefit)
              
              
              —
              
              
              (27.9
              )
              
              —
              
              
              —
              
              
              (27.9
              )Equity
                  in net (income) loss from subsidiary
              
              
              (46.5
              )
              
              (1.3
              )
              
              —
              
              
              47.8
              
              
              —Net
                  income (loss)
              
              $
              (46.0
              )
              $
              46.5
              
              $
              1.3
              
              $
              (47.8
              )
              $
              (46.0
              )
  **Thirteen
                    Weeks Ended June 30, 2006**Parent
                    Company
                
                Combined
                    GuarantorSubsidiaries
                
                Combined
                  Non-guarantorSubsidiaries
                
                ConsolidatingAdjustments
                
                Consolidated**Consolidating
                    Statement of Operations**Net
                    sales
                
                $
                272.9
                
                $
                138.0
                
                $
                35.7
                
                $
                (4.1
                )
                $
                442.5Cost
                    of goods sold
                
                
                262.4
                
                
                110.8
                
                
                33.3
                
                
                (2.6
                )
                
                403.9Gross
                    profit
                
                
                10.5
                
                
                27.2
                
                
                2.4
                
                
                (1.5
                )
                
                38.6Operating
                    expenses
                
                
                30.2
                
                
                14.4
                
                
                3.3
                
                
                —
                
                
                47.9Operating
                    income (loss)
                
                
                (19.7
                )
                
                12.8
                
                
                (0.9
                )
                
                (1.5
                )
                
                (9.3
                )Other
                    expense (income)
                
                
                (1.0
                )
                
                —
                
                
                —
                
                
                —
                
                
                (1.0
                )Interest
                    expense, net
                
                
                21.0
                
                
                —
                
                
                —
                
                
                —
                
                
                21.0Income
                    taxes
                
                
                (10.8
                )
                
                —
                
                
                0.8
                
                
                —
                
                
                (10.0
                )Minority
                    interest
                
                
                (0.7
                )
                
                —
                
                
                —
                
                
                —
                
                
                (0.7
                )Equity
                    in net (income) loss from subsidiary
                
                
                (9.6
                )
                
                —
                
                
                —
                
                
                9.6
                
                
                —Net
                    income (loss)
                
                $
                (18.6
                )
                
                12.8
                
                $
                (1.7
                )
                $
                8.1
                
                $
                (18.6
                )


24


**Thirty-nine
                  Weeks Ended June 30, 2007**Parent
                  Company
              
              Combined
                  GuarantorSubsidiaries
              
              Combined
                Non-guarantorSubsidiaries
              
              ConsolidatingAdjustments
              
              Consolidated**Consolidating
                  Statement of Operations**Net
                  sales
              
              $
              716.3
              
              $
              1,399.1
              
              $
              143.0
              
              $
              (5.9
              )
              $
              2,252.5Cost
                  of goods sold
              
              
              651.8
              
              
              1,129.1
              
              
              130.0
              
              
              (5.9
              )
              
              1,905.0Gross
                  profit
              
              
              64.5
              
              
              270.0
              
              
              13.0
              
              
              —
              
              
              347.5Operating
                  expenses
              
              
              (88.0
              )
              
              356.6
              
              
              11.1
              
              
              (0.5
              )
              
              279.2Operating
                  income (loss)
              
              
              152.5
              
              
              (86.6
              )
              
              1.9
              
              
              0.5
              
              
              68.3Loss
                  on extinguished debt
              
              
              15.4
              
              
              21.9
              
              
              —
              
              
              —
              
              
              37.3Interest
                  expense (income), net
              
              
              204.2
              
              
              (7.1
              )
              
              1.9
              
              
              (20.2
              )
              
              178.8Income
                  tax expense (benefit)
              
              
              (18.0
              )
              
              (38.2
              )
              
              1.5
              
              
              —
              
              
              (54.7
              )Minority
                  interest
              
              
              (2.7
              )
              
              —
              
              
              —
              
              
              —
              
              
              (2.7
              )Equity
                  in net (income) loss from subsidiary
              
              
              49.1
              
              
              (1.2
              )
              
              —
              
              
              (47.9
              )
              
              —Net
                  income (loss)
              
              $
              (95.5
              )
              $
              (62.0
              )
              $
              (1.5
              )
              $
              68.6
              
              $
              (90.4
              )
 **Consolidating
                    Statement of Cash Flows**Net
                    cash provided by (used for) operating activities
                
                
                137.7
                
                
                (23.0
                )
                
                (0.6
                )
                
                —
                
                
                114.1Net
                    cash used for investing activities
                
                
                (943.7
                )
                
                819.4
                
                
                (7.5
                )
                
                —
                
                
                (131.8
                )Net
                    cash provided by (used for) financing activities
                
                
                744.7
                
                
                (802.6
                )
                
                4.3
                
                
                —
                
                
                (53.6
                )Effect
                    of exchange rate changes on cash
                
                
                —
                
                
                —
                
                
                0.1
                
                
                —
                
                
                0.1Net
                    increase (decrease) in cash and cash equivalents
                
                
                (61.3
                )
                
                (6.2
                )
                
                (3.7
                )
                
                —
                
                
                (71.2
                )Cash
                    and cash equivalents at beginning of period
                
                
                62.3
                
                
                15.0
                
                
                5.8
                
                
                —
                
                
                83.1Cash
                    and cash equivalents at end of period
                
                $
                1.0
                
                $
                8.8
                
                $
                2.1
                
                $
                —
                
                $
                11.9




25


**February
                  17, 2006 to June 30, 2006**Parent
                  Company
              
              Combined
                  GuarantorSubsidiaries
              
              Combined
                Non-guarantorSubsidiaries
              
              ConsolidatingAdjustments
              
              Consolidated**Consolidating
                  Statement of Operations**Net
                  sales
              
              $
              412.3
              
              $
              187.1
              
              $
              50.5
              
              $
              (1.6
              )
              $
              648.3Cost
                  of goods sold
              
              
              390.1
              
              
              152.1
              
              
              46.4
              
              
              (1.3
              )
              
              587.3Gross
                  profit
              
              
              22.2
              
              
              35.0
              
              
              4.1
              
              
              (0.3
              )
              
              61.0Operating
                  expenses
              
              
              31.7
              
              
              22.8
              
              
              4.6
              
              
              —
              
              
              59.1Operating
                  income (loss)
              
              
              (9.5
              )
              
              12.2
              
              
              (0.5
              )
              
              (0.3
              )
              
              1.9Other
                  expenses (income)
              
              
              (0.5
              )
              
              (0.1
              )
              
              —
              
              
              —
              
              
              (0.6
              )Interest
                  expense (income), net
              
              
              28.5
              
              
              1.7
              
              
              3.0
              
              
              —
              
              
              33.2Income
                  tax expense (benefit)
              
              
              (10.9
              )
              
              (0.5
              )
              
              1.1
              
              
              —
              
              
              (10.3
              )Minority
                  interest
              
              
              (0.7
              )
              
              —
              
              
              —
              
              
              —
              
              
              (0.7
              )Equity
                  in net (income) loss from subsidiary
              
              
              (6.2
              )
              
              —
              
              
              —
              
              
              6.2
              
              
              —Net
                  income (loss)
              
              $
              (19.7
              )
              $
              11.1
              
              $
              4.6
              
              
              (6.5
              )
              $
              (19.7
              )
 **Consolidating
                  Statement of Cash Flows**Net
                  cash provided by (used for) operating activities
              
              $
              95.3
              
              $
              (3.4
              )
              $
              7.3
              
              $
              —
              
              $
              99.2Net
                  cash used for investing activities
              
              
              (938.3
              )
              
              (0.5
              )
              
              (0.3
              )
              
              —
              
              
              (939.1
              )Net
                  cash provided by (used for) financing activities
              
              
              903.2
              
              
              —
              
              
              —
              
              
              —
              
              
              903.2Effect
                  of exchange rate changes on cash
              
              
              —
              
              
              —
              
              
              0.2
              
              
              —
              
              
              0.2Net
                  increase (decrease) in cash and cash equivalents
              
              
              60.2
              
              
              (3.9
              )
              
              7.2
              
              
              —
              
              
              63.5Cash
                  and cash equivalents at beginning of period
              
              
              18.4
              
              
              5.5
              
              
              3.1
              
              
              —
              
              
              27.0Cash
                  and cash equivalents at end of period
              
              $
              78.6
              
              $
              1.6
              
              $
              10.3
              
              $
              —
              
              
              90.5










26





**October
                  1, 2005 to February 16, 2006**Parent
                  Company
              
              Combined
                  GuarantorSubsidiaries
              
              Combined
                Non-guarantorSubsidiaries
              
              ConsolidatingAdjustments
              
              Consolidated**Consolidating
                  Statement of Operations**Net
                  sales
              
              $
              420.4
              
              $
              196.3
              
              $
              52.8
              
              $
              (2.6
              )
              $
              666.9Cost
                  of goods sold
              
              
              369.6
              
              
              168.5
              
              
              43.1
              
              
              (2.2
              )
              
              579.0Gross
                  profit
              
              
              50.8
              
              
              27.8
              
              
              9.7
              
              
              (0.4
              )
              
              87.9Operating
                  expenses
              
              
              30.6
              
              
              26.7
              
              
              3.7
              
              
              —
              
              
              61.0Operating
                  income (loss)
              
              
              20.2
              
              
              1.1
              
              
              6.0
              
              
              (0.4
              )
              
              26.9Other
                  expenses (income)
              
              
              7.9
              
              
              (9.6
              )
              
              1.7
              
              
              —
              
              
              —Interest
                  expense (income), net
              
              
              9.4
              
              
              (2.2
              )
              
              0.4
              
              
              —
              
              
              7.6Income
                  taxes
              
              
              —
              
              
              —
              
              
              1.6
              
              
              —
              
              
              1.6Equity
                  in net (income) loss from subsidiary
              
              
              (14.8
              )
              
              —
              
              
              —
              
              
              14.8
              
              
              —Net
                  income (loss)
              
              $
              17.7
              
              $
              12.9
              
              $
              2.3
              
              $
              14.4
              
              $
              17.7
 **Consolidating
                  Statement of Cash Flows**Net
                  cash provided by (used for) operating activities
              
              $
              (126.2
              )
              $
              3.8
              
              $
              3.2
              
              $
              —
              
              $
              (119.2
              )Net
                  cash used for investing activities
              
              
              (6.2
              )
              
              (2.8
              )
              
              (0.1
              )
              
              —
              
              
              (9.1
              )Net
                  cash provided by (used for) financing activities
              
              
              132.4
              
              
              (0.6
              )
              
              (1.2
              )
              
              —
              
              
              130.6Effect
                  of exchange rate changes on cash
              
              
              —
              
              
              —
              
              
              (0.2
              )
              
              —
              
              
              (0.2
              )Net
                  increase (decrease) in cash and cash equivalents
              
              
              —
              
              
              0.4
              
              
              1.7
              
              
              —
              
              
              2.1Cash
                  and cash equivalents at beginning of period
              
              
              —
              
              
              0.1
              
              
              2.6
              
              
              —
              
              
              2.7Cash
                  and cash equivalents at end of period
              
              $
              —
              
              $
              0.5
              
              $
              4.3
              
              $
              —
              
              $
              4.8





**13.**  **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.





**14.**  **Recent
      Financial Accounting Standards**





In
      June
      2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes” (“FIN 48”), which is an interpretation of SFAS No. 109,
“Accounting for Income Taxes.” FIN 48 provides measurement and recognition
      guidance related to accounting for uncertainty in income taxes. FIN 48 also
      requires increased disclosure with respect to the uncertainty in
      income


27


taxes.
      The Company will adopt the provisions of FIN 48 on October 1, 2007, as required,
      and is currently evaluating the impact of such adoption on its supplemental
      combined financial statements.





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. We do not expect the adoption
      of FAS 157 to have a significant impact on the Company’s results of operations
      or 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.





**15.**  **Subsequent
      Events**





On
      July
      10, 2007, Berry announced a restructuring of the operations within its Flexible
      Film division. The restructuring will include the closing of four manufacturing
      locations: Yonkers, New York; Columbus, Georgia; City of Industry ,
      California and Santa Fe Springs, California. The Company intends to complete
      each of the closings prior to December 31, 2007. The business at each facility
      being closed will be transferred to other Berry facilities. The affected
      business accounted for less than $100 million of net sales for the last twelve
      months ended June 30, 2007. The Company expects this project to generate
      approximately $20 million of annual savings when fully implemented. The
      estimated cash liability associated with this restructuring program is estimated
      at $30 million, which includes new equipment, relocation of existing equipment,
      and other transition costs.





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 “Holding” refer to
      Berry Plastics Holding Corporation, references to “we,” “our” or “us” refer to
      Berry Plastics Holding Corporation together with its consolidated subsidiaries.
      You should read the following discussion in conjunction with the consolidated
      financial statements of Holding and its subsidiaries and the accompanying notes
      thereto, which information is included elsewhere herein. Holding is a
      wholly-owned subsidiary of Berry Plastics Group, Inc. (“Group”). This discussion
      contains forward-looking statements and involves numerous risks and
      uncertainties, including, but not limited to, those described in our Form S-4
      filed with the SEC on May 4, 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 3 of this report.





On
      April
      3, 2007, Berry Plastics Group, Inc. (“Old Group”) was merged (the “Merger”) with
      another Apollo Management, L.P. (“Apollo”) controlled company, Covalence
      Specialty Materials Holding Corporation (“CSM Holding”). The resulting company
      retained the name Berry Plastics Group, Inc. (“Group”). Immediately following
      the Merger, Berry Plastics Holding Corporation (“Old Berry”) and Covalence
      Specialty Materials Corp. (“Covalence”) were combined as a direct subsidiary of
      Group. The resulting company retained the name Berry Plastics Holding
      Corporation (“Berry” or “the Company”). In connection with the closing of the
      Merger, the Company adopted the fiscal year-end (September) of the accounting
      acquirer (Covalence).





For
      accounting purposes, Old Group and CSM Holding are considered entities under
      the
      common control of Apollo as defined in Emerging Issues Task Force 02-5
“Definition of Common Control in Relation to FASB Statement of Financial
      Accounting Standards No. 141, Business Combinations”. The financial statements
      of these entities are presented retroactively on a consolidated 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. Apollo
      acquired CSM Holding on February 16, 2006, and Old Group on September 20,
      2006.





The
      financial data for the Company for the thirteen weeks ended June 30, 2006 and
      for the period from February 16, 2006 to June 30, 2006 include the results
      of
      operations of Covalence only. The results for the period from October 1, 2005
      to
      February 16, 2006 represent the results of the predecessor of Covalence. The
      financial data for the Company for the thirteen and thirty-nine weeks ended
      June
      30, 2007 include the consolidated results of operations of Covalence and the
      Company. The balance sheets as of September 30, 2006 and June 30, 2007 also
      represent the consolidated balance sheets of Covalence and the Company as of
      each date, respectively. Accordingly, the results of operations and financial
      position of Berry Plastics Holding Corporation presented in this quarterly
      report on Form 10-Q are not comparable to previous quarterly and annual reports
      on Form 10-Q and Form 10-K, respectively, for the Company or Covalence.


29


**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 S-4 filed
      with the SEC on May 4, 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, 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 $9.3 million and $9.6 million as of
      June 30, 2007 and September 30, 2006, 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 $15.7 million and $16.6 million as of June 30, 2007 and
      September 30, 2006, 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 $7.5 million and $9.1 million, including reserves for
      expected medical claims incurred but not reported, as of June 30, 2007 and
      September 30, 2006, respectively.


30


*Workers’
      compensation insuranc* e.
      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 $7.0 million
      and $5.9 million as of June 30, 2007 and September 30, 2006,
      respectively.





*Revenue
      recognition.* The
      Company recognizes revenue in accordance with SEC Staff Accounting Bulletin
      No.
      104, “Revenue Recognition” (“SAB 104”). Revenue is recognized when the title and
      risk of loss have passed to the customer, there is persuasive evidence of an
      arrangement, delivery has occurred or services have been rendered, the sales
      price is fixed or determinable, and collectibility is reasonably assured.
      Shipping and handling costs are included in cost of sales.





*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 assets’
carrying amounts. The impairment loss is measured by comparing the fair value
      of
      the asset to its carrying amount. No impairments were recorded in the financial
      statements included in this Form 10-Q.





*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. Impairment losses are
      recorded when indicators of impairment are present and the undiscounted cash
      flows estimated to be generated by those assets are less than the assets’
carrying amounts. The impairment loss is measured by comparing the fair value
      of
      the asset to its carrying amount. In addition, we annually review our goodwill
      and other indefinite lived intangible assets for impairment. No impairments
      were
      recorded in the financial statements included in this Form 10-Q.





*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.


31


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





Based
      on
      a critical assessment of our accounting policies and the underlying judgments
      and uncertainties affecting the application of those policies, we believe that
      our consolidated financial statements provide a meaningful and fair perspective
      of Holding and its consolidated subsidiaries. This is not to suggest that other
      risk factors such as changes in economic conditions, changes in material costs
      and others could not 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.


32


**Recent
      Developments**





On
      July
      10, 2007, we
      announced a restructuring of the operations within our Flexible Film division.
      The restructuring will include the closing of four manufacturing locations:
      Yonkers, New York; Columbus, Georgia; City of Industry, California and Santa
      Fe
      Springs, California. We intend to complete each of the closings prior to
      December 31, 2007. The business at each facility being closed will be
      transferred to other Company facilities. The affected business accounted for
      less than $100 million of net sales for the last twelve months ended June 30,
      2007. The Company expects this project to generate approximately $20 million
      of
      annual savings when fully implemented. The estimated cash liability associated
      with this restructuring program is estimated at $30 million, which includes
      new
      equipment, relocation of existing equipment, and other transition
      costs.







***Results
      of Operations***





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





*Net
      Sales* .
      Net
      sales increased 82% to $807.3 million for the Quarter from $442.5 million for
      the Prior Quarter. This $364.8 million increase is primarily the result of
      the
      Old Berry net sales of $375.1 million that are not included in the Prior
      Quarter. 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 $222.8 million in the Prior Quarter (Old Berry) to $240.0 million in the
      Quarter. Base volume growth in the rigid open top business, excluding net
      selling price decreases, was 6% driven primarily by strong growth in dairy
      containers and thermoformed and injection drink cups. Net sales in the rigid
      closed top business decreased slightly from $152.3 million in the Prior Quarter
      (Old Berry) to $152.0 million in the Quarter. Base volume growth in the rigid
      closed top business, excluding net selling price decreases, was relatively
      flat
      partially the result of the sale of Berry U.K. business in April 2007. The
      flexible film business net sales decreased from $284.3 million in the Prior
      Quarter to $275.6 million in the Quarter. This decrease of $8.7 million can
      be
      primarily attributed to lower selling prices partially offset by volume from
      the
      Rollpak acquisition. Net sales in the tapes/coatings business decreased from
      $160.8 million in the Prior Quarter to $139.7 million in the Quarter primarily
      driven by softness in the new home construction market.





*G* *ross
      Profit* .
      Gross
      profit increased by $100.8 million to $139.4 million (17% of net sales) for
      the
      Quarter from $38.6 million (9% of net sales) for the Prior Quarter. This
      increase of $100.8 million or 261% is primarily the result of Old Berry not
      being included in the Prior Quarter, the combined impact of additional sales
      volume driven by the organic growth noted above, the timing effect of reduced
      resin costs versus selling prices, productivity improvement initiatives in
      the
      rigid business that have been implemented since the Prior Quarter, and synergies
      from the Merger. The gross profit of Old Berry in the Prior Quarter was $75.8
      million. Significant productivity improvements were made since the Prior
      Quarter, including the installation of state-of-the-art equipment at several
      of
      our facilities. These productivity improvements were partially offset by
      increased costs from inflation such as higher energy prices and wage
      inflation.





*Operating
      Expenses* .
      Selling, general and administrative expenses increased by $40.8 million to
      $88.6
      million for the Quarter from $47.8 million for the Prior Quarter primarily
      the
      result of the Old Berry selling, general and administrative expenses of $33.9
      million that are not included in the Prior Quarter. The remaining increase
      of
      $6.9 million can be attributed to a stock compensation charge
      of


33


$14.8
      million in the Quarter partially offset by cost reduction efforts including
      the
      synergistic opportunities from the merger of Covalence and Berry. Other expenses
      increased from $0.1 million in the Prior Quarter to $27.6 million for the
      Quarter primarily as a result of costs incurred in connection with the Covalence
      Merger and the Oxnard shutdown.




*Interest
      Expense, Net* .
      Net
      interest expense increased $38.8 million to $59.8 million for the Quarter
      compared to $21.0 million for the Prior Quarter primarily the result of the
      Old
      Berry net interest expense of $22.5 million that is not included in the Prior
      Quarter and interest on additional borrowings to fund the Apollo acquisition
      of
      Old Group.





*Loss
      on Extinguished Debt* .
      The
      Company incurred a $37.3 million loss on extinguished debt in the Quarter
      primarily as a result of the write-off of deferred financing fees from
      Covalence’s and Old Berry’s senior credit facilities and Covalence’s second
      priority floating rate note that were extinguished in connection with the
      Covalence Merger.





*Income
      Tax Expense (Benefit).* For
      the
      Quarter, we recorded an income tax benefit of $27.9 million or an effective
      tax
      rate of 38%. The
      change of $17.9 million from the benefit of $10.0 million in the Prior Quarter
      was primarily attributed to the decrease in income before income taxes for
      the
      reasons discussed above.





*Net
      Income (Loss)* .
      Net
      loss was $46.0 million for the Quarter compared to a net loss of $18.6 million
      for the Prior Quarter for the reasons discussed above.





**Three
      Quarters Ended June 30, 2007 (“YTD”)**


**Compared
      to the Three Quarters Ended June 30, 2006 (“Prior YTD”)**





*Note.* For
      comparison purposes, the results from October 1, 2005 to February 16, 2006
      have
      been combined with the results from February 17, 2006 to June 30, 2006 to
      formulate the Prior YTD.





*Net
      Sales* .
      Net
      sales increased 71% to $2,252.5 million for the YTD from $1,315.2 million for
      the Prior YTD. This $937.3 million increase is primarily the result of the
      Old
      Berry net sales of $1,050.3 million that are not included in the Prior YTD.
      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 $616.1
      million in the Prior YTD (Old Berry) to $643.1 million in the YTD driven
      primarily by strong growth in dairy containers and thermoformed drink cups.
      Net
      sales in the rigid closed top business increased from $434.2 million in the
      Prior YTD (Old Berry) to $450.3 million in the YTD primarily as a result of
      strong growth in closures and prescription vials. The flexible film business
      net
      sales decreased from $862.0 million in the Prior YTD to $761.0 million in the
      YTD. This decrease of $101.0 million can be primarily attributed to lower
      selling prices and a mild hurricane season partially offset by volume from
      the
      Rollpak acquisition. Net sales in the tapes/coatings business decreased from
      $461.1 million in the Prior YTD to $401.8 million in the YTD primarily driven
      by
      softness in the new home construction market.





*G* *ross
      Profit* .
      Gross
      profit increased by $198.6 million to $347.5 million (15% of net sales) for
      the
      YTD from $148.9 million (11% of net sales) for the Prior YTD. This increase
      of
      $198.6 million or 133% is primarily the result of Old Berry not being included
      in the Prior YTD, the combined impact of additional sales volume driven by
      the
      organic growth noted above, the timing effect of resin costs versus selling
      prices, and productivity improvement initiatives that have been implemented
      since the


34


Prior
      YTD. The gross profit of Old Berry in the Prior YTD was $213.6 million.
      Significant productivity improvements were made since the Prior YTD, including
      the installation of state-of-the-art equipment at several of our facilities.
      These productivity improvements were partially offset by increased costs from
      inflation such as higher energy prices and wage inflation.





*Operating
      Expenses* .
      Selling, general and administrative expenses increased by $131.2 million to
      $240.0 million for the YTD from $108.8 million for the Prior YTD primarily
      as a
      result of the Old Berry selling, general and administrative expenses of $102.5
      million that are not included in the Prior YTD. The remaining increase of $28.6
      million can be attributed to a stock compensation charge of $15.6 million in
      the
      YTD and increased amortization of intangibles from Apollo’s purchase of Old
      Group and CSM Holding. Other expenses increased from $0.9 million in the Prior
      YTD to $39.2 million for the YTD primarily as a result of costs incurred in
      connection with the Covalence Merger and the Oxnard shutdown.





*Interest
      Expense, Net* .
      Net
      interest expense increased $143.5 million to $178.8 million for the YTD compared
      to $35.3 million for the Prior YTD primarily as a result of the Old Berry net
      interest expense of $66.5 million that is not included in the Prior YTD and
      interest on additional borrowings to fund the Apollo acquisition of Old
      Group.





*Loss
      on Extinguished Debt* .
      The
      Company incurred a $37.3 million loss on extinguished debt in the YTD primarily
      as a result of the write-off of deferred financing fees from Covalence’s and Old
      Berry’s senior credit facilities and Covalence’s second priority floating rate
      notes that were extinguished in connection with the Covalence Merger.





*Income
      Tax Expense (Benefit).* For
      the
      YTD, we recorded an income tax benefit of $54.7 million or an effective tax
      rate
      of 37%. The change of $46.0 million from the benefit of $8.7 million in the
      Prior YTD was primarily attributed to the decrease in income before income
      taxes
      for the reasons discussed above.





*Net
      Income (Loss)* .
      Net
      loss was $90.4 million for the YTD compared to a net loss of $2.0 million for
      the Prior YTD for the reasons discussed above.





***Liquidity
      and Capital Resources***





In
      connection with the Covalence Merger, the Company entered into senior secured
      credit facilities that include a term loan in the principal amount of $1,200.0
      million and a revolving credit facility which provides borrowing availability
      equal to the lesser of (a) $400.0 million or (b) the borrowing base, which
      is a
      function, among other things, of the Company’s accounts receivable and
      inventory. The term loan matures on April 3, 2015 and the revolving credit
      facility matures on April 3, 2013.





The
      borrowings under the senior secured credit facilities bear interest at a rate
      equal to an applicable margin plus, as determined at our option, either (a)
      a
      base rate (“Base Rate”) determined by reference to the higher of (1) the prime
      rate of Credit Suisse, Cayman Islands Branch, as administrative agent, in the
      case of the term loan facility or Bank of America, N.A., as administrative
      agent, in the case of the revolving credit facility and (2) the U.S. federal
      funds rate plus 1/2 of 1% or (b) a eurodollar rate (“LIBOR”) determined by
      reference to the costs of funds for eurodollar deposits in dollars in the London
      interbank market for the interest period relevant to such borrowing Bank
      Compliance for certain additional costs. The initial applicable margin for
      LIBOR


35


rate
      borrowings under the revolving credit facility was 1.25% and under the term
      loan
      was 2.00%. The initial applicable margin for base rate borrowings under the
      revolving credit facility was 0% and under the term loan was 1.00%.





The
      term
      loan facility requires minimum quarterly principal payments of $3.0 million
      for
      the first eight years, which commenced in June 2007, with the remaining amount
      payable on April 3, 2015. In addition, the Company must prepay the outstanding
      term loan, subject to certain exceptions, with (1) beginning with the Company’s
      first fiscal year after the closing, 50% (which percentage is subject to a
      minimum of 0% upon the achievement of certain leverage ratios) of excess cash
      flow (as defined in the credit agreement); and (2) 100% of the net cash proceeds
      of all non-ordinary course asset sales and casualty and condemnation events,
      if
      the Company does not reinvest or commit to reinvest those proceeds in assets
      to
      be used in its business or to make certain other permitted investments within
      15
      months, subject to certain limitations.





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





The
      Company may voluntarily repay outstanding loans under the senior secured credit
      facilities at any time without premium or penalty, other than customary
“breakage” costs with respect to eurodollar loans. The senior secured credit
      facilities contain various restrictive covenants that, among other things and
      subject to specified exceptions, prohibit the Company from prepaying other
      indebtedness, and restrict its ability to incur indebtedness or liens, make
      investments or declare or pay any dividends. All obligations under the senior
      secured credit facilities are unconditionally guaranteed by Group and, subject
      to certain exceptions, each of the Company’s existing and future direct and
      indirect domestic subsidiaries. The guarantees of those obligations are secured
      by substantially
      all of the Company’s assets as well as those of each domestic subsidiary
      guarantor. The Company was in compliance with all the financial and operating
      covenants at June 30, 2007.





At
      June
      30, 2007, there were $20.0 million outstanding on the revolving credit facility.
      The revolving credit facility allows up to $50.0 million of letters of credit
      to
      be issued instead of borrowings under the revolving credit facility. At June
      30,
      2007, the Company had $29.4 million under the Credit Facility in letters of
      credit outstanding. At June 30, 2007, the Company had unused borrowing capacity
      of $350.6 million under the revolving line of credit. A key financial metric
      utilized in the calculation of the first lien leverage ratio is bank compliance
      EBITDA. The following table reconciles our bank compliance EBITDA of $481.0
      million for the twelve month period ended June 30, 2007 to net
      loss.




36


**Thirty-Nine
                  Weeks**
                **Ended
                  June 30,**
                **2007**
              
              **Thirteen****Weeks**
                **Ended
                  September 30,**
                **200****6**
              
              **12
                  months ended**
                **June
                  30, 2007**Bank
                  compliance EBITDA
              
              $
              291.0
              
              $
              102.6
              
              $
              481.0Net
                  interest expense
              
              
              (178.8
              )
              
              (15.8
              )
              
              (194.6
              )Depreciation
                  and amortization
              
              
              (150.6
              )
              
              (23.4
              )
              
              (174.0
              )Income
                  tax benefit
              
              
              54.7
              
              
              3.4
              
              
              58.1Loss
                  on extinguished debt
              
              
              (37.3
              )
              
              —
              
              
              (37.3
              )Business
                  optimization expense
              
              
              (44.0
              )
              
              (2.5
              )
              
              (46.5
              )Stock
                  based compensation
              
              
              (15.6
              )
              
              (0.1
              )
              
              (15.7
              )Management
                  fees
              
              
              (2.7
              )
              
              (0.1
              )
              
              (2.8
              )Inventory
                  write-up
              
              
              (9.8
              )
              
              —
              
              
              (9.8
              )Minority
                  interest
              
              
              2.7
              
              
              1.1
              
              
              3.8Pro
                  forma synergies (Covalence and Rollpak)
              
              
              —
              
              
              —
              
              
              (76.9
              )Pro
                  forma synergies (Oxnard and Norwich)
              
              
              —
              
              
              —
              
              
              (5.5
              )Pro
                  forma Rollpak EBITDA
              
              
              —
              
              
              —
              
              
              (5.0
              )Old
                  Berry bank compliance EBITDA
              
              
              —
              
              
              (69.8
              )
              
              (69.8
              )Net
                  loss
              
              $
              (90.4
              )
              $
              (4.6
              )
              $
              (95.0
              )







For
      comparison purposes, the
      following table reconciles our bank compliance EBITDA for the thirteen weeks
      ended June 30, 2007 and June 30, 2006 to net loss.





**Thirteen
                  Weeks Ended June 30,**
                **2007**
              
              **Thirteen****Weeks Ended June 30,**
                **200****6**Bank
                  compliance EBITDA
              
              $
              117.6
              
              $
              96.1Net
                  interest expense
              
              
              (59.8
              )
              
              (21.0
              )Depreciation
                  and amortization
              
              
              (52.0
              )
              
              (23.2
              )Income
                  tax benefit
              
              
              27.9
              
              
              10.0Loss
                  on extinguished debt
              
              
              (37.3
              )
              
              —Business
                  optimization expense
              
              
              (23.9
              )
              
              (2.9
              )Stock
                  based compensation
              
              
              (14.8
              )
              
              —Management
                  fees
              
              
              (1.0
              )
              
              (0.9
              )Inventory
                  write-up
              
              
              (2.7
              )
              
              (7.0
              )Minority
                  interest
              
              
              —
              
              
              0.7Old
                  Berry bank compliance EBITDA
              
              
              —
              
              
              (70.4
              )Net
                  loss
              
              $
              (46.0
              )
              $
              (18.6
              )





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


37





*Second
      Priority Senior Secured Notes*





On
      September 20, 2006, the Company issued $750.0 million of second priority senior
      secured notes (“Second Priority Notes”) comprised of (1) $525.0 million
      aggregate principal amount of 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 a rate of LIBOR plus 3.875% per annum, which resets quarterly.
      Interest on the Floating Rate Notes is payable quarterly on March 15,
      June 15, September 15 and December 15 of each year.





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





On
      or
      after September 15, 2010 and 2008, the Company may redeem some or all of the
      Fixed Rate Notes and Floating Rate Notes, respectively, at specified redemption
      prices. Additionally, on or prior to September 15, 2009 and 2008, we may redeem
      up to 35% of the aggregate principal amount of the Fixed Rate Notes and Floating
      Rate Notes, respectively, with the net proceeds of specified equity offerings
      at
      specified redemption prices. If a change of control occurs, the Company must
      give holders of the Second Priority Notes an opportunity to sell their notes
      at
      a purchase price of 101% of the principal amount plus accrued and unpaid
      interest. The Company was in compliance with all covenants at June 30,
      2007.




*1* *0
1⁄4%
      Senior Subordinated Notes*





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




The
      indenture relating to the notes contain a number of covenants that, among other
      things and subject to certain exceptions, restrict the Company’s ability and the
      ability of its restricted subsidiaries to incur indebtedness or issue
      disqualified stock or preferred stock, pay dividends or redeem or repurchase
      stock, make certain types of investments, sell assets, incur certain liens,
      restrict dividends or other payments from subsidiaries, enter into transactions
      with affiliates and consolidate, merge or sell all or substantially all of
      the
      Company’s assets. The Company was in compliance with all covenants at June 30,
      2007.




38


*11%
      Senior Subordinated Notes*





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




The
      Senior Subordinated Notes may be redeemed at the Company’s option under
      circumstances and at redemption prices set forth in the indenture. Upon the
      occurrence of a change of control, the Company is required to offer to
      repurchase all of the Senior Subordinated Notes. The indenture sets forth
      covenants and events of default that are substantially similar to those set
      forth in the indenture governing the Second Priority Notes. The Senior
      Subordinated Notes contain additional affirmative covenants and certain
      customary representations, warranties and conditions. The Company was in
      compliance with all covenants at June 30, 2007.




*Cash
      Flows*





Net
      cash
      provided by operating activities was $114.1 million for the YTD compared to
      a
      use of $20.0 million for the Prior YTD. The increase of $134.1 million is
      primarily the result of improved operations in the YTD and the inclusion of
      Old
      Berry in the YTD.





Net
      cash
      used for investing activities decreased from $948.2 million for the Prior YTD
      to
      $131.8 million for the YTD primarily as a result of the Apollo acquisition
      of
      Covalence in the Prior YTD.





Net
      cash
      used in financing activities was $53.6 million for the YTD compared to net
      cash
      provided by financing activities of $1,033.8 million in the Prior YTD. This
      change of $1,087.4 million can be primarily attributed to proceeds received
      related to the financing of the Apollo acquisition of CSM Holding in the Prior
      YTD.




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. We base such belief on historical experience and the funds
      available under the 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 S-4 filed with the Securities and Exchange
      Commission on May 4, 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 June 30, 2007, our cash
      balance was $11.9 million, and we had unused borrowing capacity under the Credit
      Facility’s borrowing base of $350.6 million.


39


*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
      Credit Facility and the $225.0 million of Second Priority Senior Secured
      Floating Rate Notes. The Credit Facility is comprised of (1) a $1,200.0 million
      term loan and (2) a $400.0 million revolving credit facility. At June 30, 2007,
      $20.0 million was outstanding on the revolving credit facility, and the net
      outstanding balance of the term loan at June 30, 2007 was $1,197.0 million.
      At
      June 30, 2007, the Eurodollar rate applicable to the term loan and the Second
      Priority Senior Secured Floating Rate Notes was 5.36%. If the Eurodollar rate
      increases 0.25% and 0.5%, we estimate an annual increase in our interest expense
      of approximately $3.6 million and $7.2 million, respectively.





*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*





(a)
      Disclosure controls and procedures.





As
      required by Rule 13a-15 under the Exchange Act, the Company’s management carried
      out an evaluation with the participation of our Chief Executive Officer and
      Chief Financial Officer, of the effectiveness of our disclosure controls and
      procedures, as of the end of the last fiscal quarter. Based upon that
      evaluation, the Chief Executive Officer and Chief Financial Officer concluded
      that our disclosure controls and procedures are effective to ensure that
      information required to be disclosed by us in the reports we file or submit
      under the Exchange Act is recorded, processed, summarized and reported, within
      the time periods specified in the Securities and Exchange Commission’s rules and
      forms. In connection with the new rules, we currently are in process of further
      reviewing and documenting our disclosure controls and procedures, including
      our
      internal controls and procedures for financial reporting, and may from time
      to
      time make changes aimed at enhancing their effectiveness and to ensure that
      our
      systems evolve with our business.





(b)
      Changes in internal control over financial reporting.





There
      were no changes in our internal control over financial reporting identified
      in
      connection with our evaluation of our disclosure controls and procedures that
      occurred during our last fiscal quarter that has materially affected, or is
      reasonably likely to materially affect, our internal control over financial
      reporting.





40


**Part
      II. Other Information**





**Item
      1.**  **Legal
      Proceedings**





There
      have been no material changes in legal proceedings from the items disclosed
      in our
      Form
      S-4 filed with the Securities
      and Exchange Commission on May
      4, 2007.





**Item
      1A.**  **Risk
      Factors**





You
      should carefully consider the risks described in our Form
      S-4
      filed with the Securities
      and Exchange Commission on May
      4, 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
      S-4
      filed with the Securities
      and Exchange Commission on May
      4, 2007 .





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




Not
      Applicable





**Item** **3.**  **Defaults
      Upon Senior Securities**





Not
      Applicable





**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





41





**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 Holding Corporation


August
      14, 2007




By: /s/
      James M. Kratochvil


James
      M.
      Kratochvil




Executive
      Vice President, Chief Financial Officer,


Treasurer
      and Secretary (Principal Financial and


Accounting
      Officer)








42