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 March 29, 2008


or


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





For the
transition period from___________________to__________________





Commission
File Number 333-138380


BERRY
PLASTICS CORPORATION


(f/k/a
Berry Plastics Holding Corporation)


(Exact name of registrant as
specified in its charter)


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





SEE
TABLE OF ADDITIONAL REGISTRANT GUARANTORS





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





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





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





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





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


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





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





As of May
11, 2008 all of the outstanding 100 shares of the Common Stock, $.01 par value,
of Berry Plastics Corporation were held by Berry Plastics Group,
Inc.







Table
of Additional Registrant Guarantors




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


2




Table
of Additional Registrant Guarantors (Continued)







Exact
      Name
            Jurisdiction
      of
              Organization
            Primary
      Standard
              Industrial
              Classification
      Code
              Number
            I.R.S.
              Employer
              Identification
              No.
            Name,
      Address and Telephone
              Number
      of Principal Executive
              OfficesCovalence
      Specialty Adhesives LLC
            Delaware
            2672
            20-4104683
            (a)Covalence
      Specialty Coatings LLC
            Delaware
            2672
            20-4104683
            (a)Caplas
      LLC
            Delaware
            3089
            20-3888603
            (a)Caplas
      Neptune, LLC
            Delaware
            3089
            20-5557864
            (a)Captive
      Holdings, Inc.
            Delaware
            3089
            20-1290475
            (a)Captive
      Plastics, Inc.
            New
      Jersey
            3089
            22-1890735
            (a)Grafco
      Industries Limited Partnership
            Maryland
            3089
            52-1729327
            (a)Rollpak
      Acquisition Corporation
            Indiana
            3089
            03-0512845
            (a)Rollpak
      Corporation
            Indiana
            3089
            35-1582626
            (a)


(a)  101
Oakley Street, Evansville, IN 47710


3


INTRODUCTION





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





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





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





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





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





On
December 29, 2007, Berry Plastics Holding Corporation completed an internal
entity restructuring.  Pursuant to this restructuring, effective
December 28, 2007, Berry Plastics Corporation converted to Berry Plastics, LLC
and then merged with and into Berry Plastics Holding Corporation.  In
addition, Berry Plastics Holding Corporation changed its name to Berry Plastics
Corporation (“Berry” or the “Company”).


4





The
financial data for the Company for the thirteen and twenty-six weeks ended March
31, 2007 include the combined results of operations of Old Covalence and Old
Berry Holding.  The financial data for the Company for the thirteen
and twenty-six weeks ended March 29, 2008 include the consolidated results of
operations of the Company.  The balance sheets as of March 29, 2008
and September 29, 2007 also represent the consolidated balance sheets of the
Company as of each date, respectively.  All adjustments that
management considers necessary for a fair presentation of Berry Plastics
Corporation’s financial position and results of operations as of the date and
for the period indicated have been included.





CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS





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





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


·
            catastrophic
      loss of one of our key manufacturing
facilities;


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


·
            risks
      associated with our substantial indebtedness and debt
    service;


·
            performance
      of our business and future operating
results;


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


·
            reliance
      on unpatented propriety know-how and trade
  secrets


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


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


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





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


5


AVAILABLE
INFORMATION





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


6





Berry
Plastics Corporation





Form
10-Q Index





For
Quarterly Period Ended March 29, 2008


Part
      I.
              Financial
      Information
              
              Page No.Item
      1.
              Financial
      Statements:Consolidated
      Balance Sheets
              8Consolidated
      or Combined Statements of Operations
              10Consolidated
      or Combined Statements of Changes inStockholders’
      Equity
              11Consolidated
      or Combined Statements of Cash Flows
              12Notes
      to Consolidated or Combined Financial Statements
              13Item
      2.
              Management’s
      Discussion and Analysis ofFinancial
      Condition and Results of Operations
              32Item
      3.
              Quantitative
      and Qualitative Disclosures about Market Risk
              41Item
      4.
              Controls
      and Procedures
              42Part
      II.
              Other
      InformationItem
      1.
              Legal
      Proceedings
              43Item
      1A.
              Risk
      Factors
              43Item
      2.
              Unregistered
      Sales of Equity Securities and Use of Proceeds
              44Item
      3.
              Defaults
      Upon Senior Securities
              44Item
      4.
              Submission
      of Matters to a Vote of Security Holders
              44Item
      5.
              Other
      Information
              44Item
      6.
              Exhibits
              44Signature
              
              
              45


7


Part
1.   Financial Information


Item
1.   Financial Statements





Berry
Plastics Corporation


Consolidated
Balance Sheets


(In
Millions of Dollars)





March
      29,
              2008
            
            
            September
      29,
              2007(Unaudited)AssetsCurrent
      assets:Cash and cash
      equivalents
            
            $
            19.5
            
            
            $
            14.6Accounts receivable (less
      allowance for doubtful accounts of $11.4 at March 29, 2008 and $11.3 at
      September 29, 2007)
            
            
            397.7
            
            
            
            372.5Inventories:Finished goods
            
            
            275.2
            
            
            
            227.3Raw materials and work in
      process
            
            
            176.1
            
            
            
            158.0451.3
            
            
            
            385.3Deferred income
    taxes
            
            
            35.7
            
            
            
            31.7Prepaid expenses and other
      current assets
            
            
            32.8
            
            
            
            35.7Total
      current assets
            
            
            937.0
            
            
            
            839.8Property
      and equipment:Land
            
            
            38.1
            
            
            
            42.2Buildings and
      improvements
            
            
            154.4
            
            
            
            178.7Equipment and construction in
      progress
            
            
            922.8
            
            
            
            735.11,115.3
            
            
            
            956.0Less accumulated
      depreciation
            
            
            246.8
            
            
            
            171.0868.5
            
            
            
            785.0Goodwill,
      intangible assets and deferred costs
            
            
            2,644.1
            
            
            
            2,242.1Other
      assets
            
            
            2.3
            
            
            
            2.52,646.4
            
            
            
            2,244.6Total
      assets
            
            $
            4,451.9
            
            
            $
            3,869.4


8





Berry
Plastics Corporation


Consolidated
Balance Sheets (continued)


(In
Millions of Dollars)





March
      29,
              2008
            
            
            September
      29,
              2007(Unaudited)Liabilities
      and stockholders' equityCurrent
      liabilities:Accounts payable
            
            $
            277.7
            
            
            $
            263.2Accrued expenses and other
      current liabilities
            
            
            183.8
            
            
            
            189.4Current portion of long-term
      debt
            
            
            18.1
            
            
            
            17.4Total
      current liabilities
            
            
            479.6
            
            
            
            470.0Long-term
      debt, less current portion
            
            
            3,304.3
            
            
            
            2,693.3Deferred
      income taxes
            
            
            181.7
            
            
            
            217.7Other
      long-term liabilities
            
            
            105.9
            
            
            
            38.4Total
      liabilities
            
            
            4,071.5
            
            
            
            3,419.4Commitments
      and contingenciesStockholders'
      equity:Contributed equity from parent,
      net
            
            
            605.7
            
            
            
            598.1Accumulated
    deficit
            
            
            (212.5
            )
            
            
            (151.9
            )Accumulated other comprehensive
      income (loss)
            
            
            (12.8
            )
            
            
            3.8Total
      stockholders’ equity
            
            
            380.4
            
            
            
            450.0Total
      liabilities and stockholders’ equity
            
            $
            4,451.9
            
            
            $
            3,869.4








See
notes to consolidated or combined financial statements.


9





Berry
Plastics Corporation


Consolidated
or Combined Statements of Operations


(Unaudited)


(In
Millions of Dollars)





Thirteen
      Weeks Ended
            
            
            Twenty-Six
      Weeks EndedMarch
      29,
              2008
            
            
            March
      31,
              2007
            
            
            March
      29,
              2008
            
            
            March
      31,
              2007Net
      sales
            
            $
            844.3
            
            
            $
            741.6
            
            
            $
            1,607.0
            
            
            $
            1,445.2Cost
      of goods sold
            
            
            731.9
            
            
            
            619.9
            
            
            
            1,385.8
            
            
            
            1,237.1Gross
      profit
            
            
            112.4
            
            
            
            121.7
            
            
            
            221.2
            
            
            
            208.1Operating
      expenses:Selling, general and
      administrative
            
            
            83.6
            
            
            
            76.9
            
            
            
            165.4
            
            
            
            151.4Restructuring and impairment
      charges, net
            
            
            1.7
            
            
            
            3.8
            
            
            
            5.2
            
            
            
            4.1Other operating
      expenses
            
            
            5.9
            
            
            
            3.4
            
            
            
            18.9
            
            
            
            7.5Operating
      income
            
            
            21.2
            
            
            
            37.6
            
            
            
            31.7
            
            
            
            45.1Other
      expenses (income)
            
            
            —
            
            
            
            (0.1
            )
            
            
            —
            
            
            
            —Interest
      expense, net
            
            
            67.2
            
            
            
            59.1
            
            
            
            128.7
            
            
            
            119.0Loss
      before income taxes
            
            
            (46.0
            )
            
            
            (21.4
            )
            
            
            (97.0
            )
            
            
            (73.9
            )Income
      tax benefit
            
            
            (16.7
            )
            
            
            (7.3
            )
            
            
            (36.4
            )
            
            
            (26.8
            )Minority
      interest, net of tax
            
            
            —
            
            
            
            (0.5
            )
            
            
            —
            
            
            
            (2.7
            )Net
      loss
            
            $
            (29.3
            )
            
            $
            (13.6
            )
            
            $
            (60.6
            )
            
            $
            (44.4
            )








See notes to consolidatedor combinedfinancial
statements.


10


Berry
Plastics Corporation


Consolidated
or Combined Statement of Changes in Stockholders' Equity


For
Twenty-Six Weeks Ended March 29, 2008 and March 31, 2007


(Unaudited)


(In
Millions of Dollars)





Parent
              Company
              Investment
            
            
            Accumulated
              Other
              Comprehensive
              Income
            
            
            Accumulated
              Deficit
            
            
            Total
            
            
            Comprehensive
      Income (Loss)Balance
      at September 30, 2006
            
            $
            440.6
            
            
            $
            0.2
            
            
            $
            (31.2
            )
            
            $
            409.6Net
      transfers to parent
            
            
            (0.8
            )
            
            
            —
            
            
            
            —
            
            
            
            (0.8
            )Stock-based
      compensation
            
            
            0.8
            
            
            
            —
            
            
            
            —
            
            
            
            0.8Currency
      translation
            
            
            —
            
            
            
            0.9
            
            
            
            —
            
            
            
            0.9
            
            
            $
            0.9Other
      comprehensive gains
            
            
            —
            
            
            
            0.6
            
            
            
            —
            
            
            
            0.6
            
            
            
            0.6Net
      loss
            
            
            —
            
            
            
            —
            
            
            
            (44.4
            )
            
            
            (44.4
            )
            
            
            (44.4
            )Balance
      at March 31, 2007
            
            $
            440.6
            
            
            $
            1.7
            
            
            $
            (75.6
            )
            
            $
            366.7
            
            
            $
            (42.9
            )





Parent
              Company
              Investment
            
            
            Accumulated
              Other
              Comprehensive
              Income
              (Loss)
            
            
            Accumulated
              Deficit
            
            
            Total
            
            
            Comprehensive
      Income (Loss)Balance
      at September 29, 2007
            
            $
            598.1
            
            
            $
            3.8
            
            
            $
            (151.9
            )
            
            $
            450.0Stock
      compensation expense
            
            
            9.3
            
            
            
            —
            
            
            
            —
            
            
            
            9.3Net
      transfers to parent
            
            
            (1.7
            )
            
            
            —
            
            
            
            —
            
            
            
            (1.7
            )Net
      loss
            
            
            —
            
            
            
            —
            
            
            
            (60.6
            )
            
            
            (60.6
            )
            
            $
            (60.6
            )Currency
      translation
            
            
            —
            
            
            
            0.1
            
            
            
            —
            
            
            
            0.1
            
            
            
            0.1Interest
      rate hedges
            
            
            —
            
            
            
            (16.7
            )
            
            
            —
            
            
            
            (16.7
            )
            
            
            (16.7
            )Balance
      at March 29, 2008
            
            $
            605.7
            
            
            $
            (12.8
            )
            
            $
            (212.5
            )
            
            $
            380.4
            
            
            $
            (77.2
            )





See notes to consolidatedor combinedfinancial
statements.





11





Berry
Plastics Corporation


Consolidated
or Combined Statements of Cash Flows


(Unaudited)


(In
Millions of Dollars)





Twenty-Six
      Weeks EndedMarch
      29,
              2008
            
            
            March
      31,
              2007Operating
      activitiesNet
      loss
            
            $
            (60.6
            )
            
            $
            (44.4
            )Adjustments
      to reconcile net loss to net cash provided by operating
      activities:Depreciation
      and amortization
            
            
            122.6
            
            
            
            98.5Non-cash
      interest expense
            
            
            6.4
            
            
            
            4.4Non-cash
      compensation
            
            
            9.3
            
            
            
            0.8Minority
    interest
            
            
            —
            
            
            
            (2.7
            )Loss on fixed asset
      disposal
            
            
            —
            
            
            
            1.7Deferred
      income tax benefit
            
            
            (37.9
            )
            
            
            (27.0
            )Changes
      in operating assets and liabilities:Accounts receivable,
      net
            
            
            9.3
            
            
            
            24.5Inventories
            
            
            (26.3
            )
            
            
            61.0Prepaid expenses and other
      assets
            
            
            6.2
            
            
            
            9.6Accounts payable and other
      liabilities
            
            
            (28.5
            )
            
            
            (36.8
            )Net
      cash provided by operating activities
            
            
            0.5
            
            
            
            89.6Investing
      activitiesAdditions
      to property and equipment
            
            
            (78.4
            )
            
            
            (39.6
            )Proceeds
      from disposal of assets
            
            
            82.0
            
            
            
            —Acquisition
      of business, net of cash acquired
            
            
            (577.8
            )
            
            
            (35.4
            )Net
      cash used for investing activities
            
            
            (574.2
            )
            
            
            (75.0
            )Financing
      activitiesProceeds
      from long-term borrowings
            
            
            607.4
            
            
            
            —Issuance
      of common stock
            
            
            —
            
            
            
            0.6Repayments
      on long-term borrowings
            
            
            (13.9
            )
            
            
            (27.6
            )Debt
      financing costs
            
            
            (12.9
            )
            
            
            —Equity
      distributions, net
            
            
            (1.7
            )
            
            
            (1.3
            )Net
      cash provided by (used for) financing activities
            
            
            578.9
            
            
            
            (28.3
            )Effect
      of exchange rate changes on cash
            
            
            (0.3
            )
            
            
            0.2Net
      increase (decrease) in cash and cash equivalents
            
            
            4.9
            
            
            
            (13.5
            )Cash
      and cash equivalents at beginning of period
            
            
            14.6
            
            
            
            83.1Cash
      and cash equivalents at end of period
            
            $
            19.5
            
            
            $
            69.6





See
notes to consolidated or combined financial statements.


12


Berry
Plastics Corporation


Notes to
Consolidated or Combined Financial Statements


(Unaudited)


(In
millions of dollars, except as otherwise noted)








1.
            Background
      and Nature of Operations





Berry
Plastics Corporation manufactures and markets plastic packaging products,
plastic film products, specialty adhesives and coated products.  At
March 29, 2008 the Company had 70 production and manufacturing facilities,
with 61 located in the United States.





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





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





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





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





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


13


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





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





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





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





2.
            Basis
      of Presentation





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





The
Company’s operating results  for the thirteen week and twenty-six week
periods ended March 31, 2007 represent the combined results of operations of Old
Covalence and Old Berry Holding.  Minority interest for the thirteen
and twenty-six weeks ended March 31, 2007 represents the non-Apollo equity
owners’ share of the loss for the period.  As previously disclosed in
the Company’s Form 10-K, the minority interest was exchanged in connection with
the Berry Covalence Merger.  The Company’s operating results for the
thirteen week and twenty-six week periods ended March 29, 2008 include the
consolidated operating results of the Company.  The balance sheets as
of March 29, 2008 and September 29, 2007 represent the consolidated balance
sheets of the Company as of the respective dates.  Berry has recorded
expense in their financial statements related to stock


14


compensation
of Berry Group, management fees charged by Apollo and other investors to Berry
Group and recorded income taxes to push down the respective amounts that relate
to the consolidated or combined operations of the
Company.  Contributed equity from parent includes the equity from
Berry Group that was invested in Berry by Apollo and other
shareholders.  Berry, through its wholly owned subsidiaries operates
in four primary segments:  rigid open top, rigid closed top, flexible
films, and tapes/coatings.  The Company’s customers are located
principally throughout the United States, without significant concentration in
any one region or with any one customer.  The Company performs
periodic credit evaluations of its customers’ financial condition and generally
does not require collateral.





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





3.      Acquisitions





Rollpak


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





MAC
Closures, Inc.


On
December 19, 2007, the Company acquired 100% of the outstanding common stock of
MAC Closures, Inc. (“MAC”), a plastic cap and closure manufacturer with
operations located in Waterloo, Quebec and Oakville, Ontario for approximately
CN$72.0 million.  MAC is a fully integrated manufacturer of injection
molded plastic caps and closures primarily serving the pharmaceutical,
nutraceutical, personal care, amenity, and household and industrial chemical
industries with 2007 calendar year sales of $37.1 million.  MAC
manufactures stock and custom products for U.S. and Canadian based private and
national brand owners, distributors and other packaging suppliers and will be
included in our closed top segment.  The purchase price was funded
utilizing cash on hand from the sale-leaseback transaction discussed elsewhere
in this Form 10-Q.  The MAC acquisition has been accounted for using
the purchase method of accounting, and accordingly, the purchase price has been
allocated to working capital and fixed assets with any excess allocated to
goodwill.  The Company has not yet completed the purchase price
allocation and is subject to change.


15





Captive
Holdings, LLC


On
February 5, 2008, Berry completed its purchase of the outstanding capital stock
of Captive Holdings, Inc., the parent company of Captive Plastics, Inc.
(“Captive”).  Pursuant to a Stock Purchase Agreement dated December
21, 2007 and amended on January 25, 2008 (the “Purchase Agreement”), the
aggregate purchase price was approximately $500.0 million, subject to certain
post-closing upward or downward adjustments.  Captive manufactures
blow-molded bottles and injection-molded closures for the food, healthcare,
spirits and personal care end markets.  To finance the purchase, Berry
used the proceeds from a $520.0 million bridge loan facility as described in
more detail on a Form 8-K filed with the SEC on February 11, 2008 and as
described in footnote 7. 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 acquisition:





Working
      capital
            
            $
            45.8Property
      plant and equipment
            
            
            84.4Goodwill
      and intangible assets
            
            
            386.1Long-term
      liabilities
            
            
            (12.2
            )Net
      assets acquired
            
            $
            504.1





The
Company has not yet completed the purchase price allocation and is subject to
change.  The Company recorded a $2.2 million fair value adjustment
which was charged to cost of goods sold in the current quarter.  Pro
forma net sales for the thirteen and twenty-six weeks ended March 29, 2008 were
$872.0 million and $1,705.5 million, respectively.  Pro forma net
sales for the thirteen and twenty-six weeks ended March 31, 2007 were $814.5
million and $1,587.9 million, respectively.  The pro forma net sales
assume that the Captive acquisition occurred at the beginning of the respective
period.


The
information presented above is for informational purposes only and is not
necessarily indicative of the operating results that would have occurred had the
Captive Acquisition been consummated at the beginning of the respective period,
nor are they necessarily indicative of future operating results.





4.  Restructuring





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





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





During
July and September 2007 the Company announced a restructuring of the operations
within its flexible films division, including the closure of five manufacturing
facilities in Yonkers, New York; Columbus, Georgia; City of Industry,
California; Santa Fe Springs, California and Sparks Nevada.


16





During
March 2008 the Company announced the intention to shut down a manufacturing
facility within its tapes/coatings division located in San Luis Potosi,
Mexico.  The business from this facility was moved to Altacomulco,
Mexico facility.





The table
below sets forth the Company’s estimate of the total cost of the restructuring
programs, the portion recognized through March 29, 2008 and the portion expected
to be recognized in a future period:





Expected
      Total
              Costs
            
            
            Recognized
              through
      March 29, 2008
            
            
            To
      be Recognized
              in
      FutureSeverance
      and termination benefits
            
            $
            8.7
            
            
            $
            8.6
            
            
            $
            0.1Facility
      exit costs
            
            
            16.4
            
            
            
            14.7
            
            
            
            1.7Asset
      impairment
            
            
            18.1
            
            
            
            18.1
            
            
            
            —Other
            
            
            7.0
            
            
            
            3.0
            
            
            
            4.0Total
            
            $
            50.2
            
            
            $
            44.4
            
            
            $
            5.8





The table
below sets forth the significant components of the restructuring charges
recognized through March 29, 2008, by segment:





Tapes/
              Coatings
            
            
            Flexible
              Films
            
            
            Corporate
            
            
            Rigid
              Closed
              Top
            
            
            TotalSeverance
      and termination benefits
            
            $
            1.8
            
            
            $
            3.1
            
            
            $
            3.5
            
            
            $
            0.2
            
            
            $
            8.6Facility
      exit costs
            
            
            0.4
            
            
            
            7.5
            
            
            
            1.9
            
            
            
            4.9
            
            
            
            14.7Asset
      impairment
            
            
            3.4
            
            
            
            14.7
            
            
            
            —
            
            
            
            —
            
            
            
            18.1Other
            
            
            2.2
            
            
            
            0.4
            
            
            
            —
            
            
            
            0.4
            
            
            
            3.0Total
            
            $
            7.8
            
            
            $
            25.7
            
            
            $
            5.4
            
            
            $
            5.5
            
            
            $
            44.4





The table
below sets forth the activity with respect to the restructuring accrual at
September 29, 2007 and March 29, 2008:





Employee
              Severance
              and
      Benefits
            
            
            Facilities
              Exit
              Costs
            
            Other
            
            
            Non-cash
              Charges
            
            
            TotalBalance
      at September 30, 2006
            
            $
            ―
            
            
            $
            1.2
            
            
            $
            ―
            
            
            $
            ―
            
            
            $
            1.2Charges
            
            
            7.5
            
            
            
            11.3
            
            
            
            2.2
            
            
            
            18.1
            
            
            
            39.1Non-cash
      charges
            
            
            ―
            
            
            
            ―
            
            
            
            ―
            
            
            
            (18.1
            )
            
            
            (18.1
            )Cash
      payments
            
            
            (4.5
            )
            
            
            (2.1
            )
            
            
            (2.2
            )
            
            
            ―
            
            
            
            (8.8
            )Balance
      at September 29, 2007
            
            
            3.0
            
            
            
            10.4
            
            
            
            ―
            
            
            
            ―
            
            
            
            13.4Charges
            
            
            1.1
            
            
            
            3.3
            
            
            
            0.8
            
            
            
            ―
            
            
            
            5.2Cash
      payments
            
            
            (2.1
            )
            
            
            (8.3
            )
            
            
            (0.8
            )
            
            
            ―
            
            
            
            (11.2
            )Balance
      at March 29, 2008
            
            $
            2.0
            
            
            $
            5.4
            
            
            $
            ―
            
            
            $
            ―
            
            
            $
            7.4





The
employee severance and termination benefits relate to the elimination of
approximately 500 employees from the various manufacturing and administrative
facilities. The facilities exit costs include $10.8 million of anticipated lease
termination costs related to the City of Industry, Santa Fe Springs, Yonkers,
Bedminster, Shreveport and Oxnard facilities. The estimated costs are net
of


17


expected
sublease income. The asset impairment charge relates to land, building and
equipment located at each of the facilities, determined to be impaired as a
result of the decision to close those facilities.





The
restructuring costs accrued as of March 29, 2008 will result in future cash
outflows. The charges recognized in the quarter ended March 29, 2008 have been
reported as restructuring expense in the consolidated statement of operations.
The remaining liability as of March 29, 2008 has been included within accrued
expenses on the consolidated balance sheet.





5.  Goodwill,
Intangible Assets and Deferred Costs





The
following table sets forth the gross carrying amount and accumulated
amortization of the Company’s goodwill, intangible assets and deferred
costs:





March
      29,
              2008
            
            
            September
      29,
              2007
            
            Amortization
              PeriodDeferred
      financing fees
            
            $
            55.9
            
            
            $
            43.0
            
            Respective
      debtCustomer
      relationships
            
            
            862.1
            
            
            
            862.2
            
            11
      – 20 yearsGoodwill
            
            
            1,567.8
            
            
            
            1,132.0
            
            Indefinite
      livedTrademarks
            
            
            256.7
            
            
            
            256.7
            
            Indefinite
      livedOther
      intangibles
            
            
            53.6
            
            
            
            53.3
            
            10-20
      yearsAccumulated
      amortization
            
            
            (152.0
            )
            
            
            (105.1
            )$
            2,644.1
            
            
            $
            2,242.1





6.  Accrued
Expenses and Other Current Liabilities





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





March
      29,
              2008
            
            
            September
      29,
              2007Employee
      compensation, payroll and other taxes
            
            $
            57.3
            
            
            $
            70.1Interest
            
            
            26.4
            
            
            
            21.7Restructuring
            
            
            7.4
            
            
            
            13.4Rebates
            
            
            33.1
            
            
            
            35.9Other
            
            
            59.6
            
            
            
            48.3$
            183.8
            
            
            $
            189.4





18


7.      Long-Term
Debt





Long-term
debt consists of the following:





March
      29,
              2008
            
            
            September
      29,
              2007Term
      loan
            
            $
            1,191.0
            
            
            $
            1,194.0Revolving
      line of credit
            
            
            131.0
            
            
            
            50.0Second
      Priority Senior Secured Fixed Rate Notes
            
            
            525.0
            
            
            
            525.0Second
      Priority Senior Secured Floating Rate Notes
            
            
            225.0
            
            
            
            225.0Senior Secured
      Bridge Loan
            
            
            520.0
            
            
            
            ―11%
      Senior Subordinated Notes
            
            
            434.6
            
            
            
            428.210
      1⁄4% Senior Subordinated Notes
            
            
            265.0
            
            
            
            265.0Capital
      leases and other
            
            
            30.8
            
            
            
            23.53,322.4
            
            
            
            2,710.7Less
      current portion of long-term debt
            
            
            (18.1
            )
            
            
            (17.4
            )$
            3,304.3
            
            
            $
            2,693.3





The
current portion of long-term debt consists of $12.0 million of quarterly
installments on the term loan and $6.1 million of principal payments related to
capital lease obligations.





Senior
Secured Credit Facility


The
Company’s senior secured credit facilities consist of a term loan in the
original principal amount of $1,200 million and a $400.0 million asset based
revolving line of credit.  The availability under the revolving line
of credit is based on the lesser of $400.0 million or on a defined borrowing
base which is calculated based on available accounts receivable and
inventory.  Under the revolving line of credit , the Company is
required to maintain a consolidated fixed charge coverage ration of at least
1.00 to 1.00 during any period when availability falls below 10% and for ten
consecutive days after availability exceeds 10%. The term loan matures on April
3, 2015 and the line of credit matures on April 3, 2013.  The interest
rate on the term loan and the line of credit were 5.10% and 4.31% at March 29,
2008, respectively, determined by reference to the costs of funds for eurodollar
deposits in dollars in the London interbank market (“LIBOR”) for the interest
period relevant to such borrowing plus the applicable margin.  The
applicable margin for LIBOR rate borrowings under the revolving credit facility
ranges from 1.00% to 1.75% and for the term loan is 2.00%.  The line
of credit is also subject to an unused commitment fee for unused borrowing
ranging from 0.25% to 0.35% per annum and a letter of credit fee of 0.125% per
annum for each letter of credit that is issued.  At March 29, 2008,
there was $131.0 million outstanding on the revolving credit
facility.  The revolving credit facility allows up to $100.0 million
of letters of credit to be issued instead of borrowings under the revolving
credit facility. At March 29, 2008, the Company had $25.2 million under the
revolving credit facility in letters of credit outstanding. At March 29,
2008, the Company had unused borrowing capacity of $243.8 million under the
revolving credit facility.  The Company was in compliance with all
covenants at March 29, 2008.





Second
Priority Senior Secured Notes


The
Company’s $750.0 million of second priority senior secured notes (“Second
Priority Notes”) are comprised of (a) $525.0 million aggregate principal amount
of 8 7/8% second priority fixed rate notes (“Fixed Rate Notes”) and (b) $225.0
million aggregate principal amount of second priority senior secured floating
rate notes (“Floating Rate Notes”).  The Second Priority Notes mature
on




19


September
15, 2014.  Interest on the Fixed Rate Notes is due semi-annually on
March 15 and September 15. The Floating Rate Notes bear interest at LIBOR (4.99%
at March 29, 2008) plus 3.875% per annum, which resets
quarterly.  Interest on the Floating Rate Notes is payable quarterly
on March 15, June 15, September 15 and December 15 of each
year. The Company was in compliance with all covenants at March 29,
2008.




Senior
Secured Bridge Loan


On
February 5, 2008, the Company entered into a Senior Secured Bridge Loan Credit
Agreement which comprised of a $520.0 million bridge loan
facility.  Interest on the bridge facility accrues at a rate equal to
an applicable margin plus, at our option, either (a) a base rate (“Base Rate”)
determined by reference to the higher of (1) the prime rate of Bank of America,
as administrative agent, and (2) the U.S. federal funds rate plus 1/2 of 1% or
(b) a eurodollar rate determined by reference to the costs of funds for
eurodollar deposits in the LIBOR for the interest period relevant to such
borrowing, adjusted for certain costs. The initial applicable margin for LIBOR
rate borrowings was 4.00% per annum, and the initial applicable rate for Base
Rate borrowings was 3.00% per annum. On April 21, 2008 the Company completed a
private placement of $680.6 million, aggregate principal amount of priority
floating rate senior secured notes.  The Company received gross
proceeds of $661.3 million, before expenses, and repaid the outstanding
borrowings under the Senior Secured Bridge Loan that was used to finance and pay
costs related to the Company’s acquisition of Captive and to repay amounts
outstanding under the Company’s revolving credit facility as well as to pay fees
and expenses related to the offering.





11%
Senior Subordinated Notes


The
Company’s senior subordinated notes in the original principal amount of
$425.0 million (“11% Senior Subordinated Notes”) were sold in a private
placement to Goldman, Sachs and Co. and are exempt from registration under the
Securities Act.  The notes mature on 2016. Interest is payable
quarterly in cash; provided, however, that on any quarterly interest payment
date on or prior to the third anniversary of the issuance, the Company can
satisfy up to 3% of the interest payable on such date by capitalizing such
interest and adding it to the outstanding principal amount of the 11% Senior
Subordinated Notes.  The Company elected to satisfy 3% of its interest
obligation by issuing additional notes as discussed above in satisfaction of its
interest obligations for its September 2007, December 2007, and March 2008
interest payments ($3.2 million each). The Company was in compliance with
all covenants at March 29, 2008.




10
1⁄4% Senior Subordinated Notes


The
Company’s $265.0 million in aggregate principal amount of 10 1⁄4% senior
subordinated notes (“10 1⁄4% Senior Subordinated Notes”) mature on March 1,
2016.  The notes are senior subordinated obligations of the Company
and rank junior to all other senior indebtedness that does not contain similar
subordination provisions.  No principal payments are required with
respect to the 10 1⁄4% Senior Subordinated Notesprior to
maturity.  Interest on the 10 1⁄4% Senior Subordinated Notes is due
semi-annually on March 1 and September 1.  The Company was in
compliance with all covenants at March 29, 2008.





Derivative
Instruments


In August
2007, the Company entered into two interest rate exchange agreements that were
effective on November 5, 2007.  The first agreement requires the
Company to pay a fixed rate of 4.875% on $300 million of notional principal
for two years to the counterparty.  The counterparty pays to the
Company a variable rate on the same amount of notional principal based on the
three-month LIBOR. The second agreement requires the Company to pay a fixed rate
of 4.92% on $300 million of notional principal for three years to the
counterparty.  The counterparty pays to the Company a


20


variable
rate on the same notional principal based on the three-month
LIBOR.  The counterparty to each agreement is a global financial
institution. The Company is exposed to credit loss in the event of
nonperformance by the counterparty to the agreement; however, the Company
considers this risk to be low.





On
January 22, 2008, the Company entered into an interest rate swap transaction to
protect $300.0 million of the outstanding variable rate term loan debt from
future interest rate volatility.  The swap agreement became effective
February 5, 2008.  The swap agreement has a notional amount of $300.0
million and swaps three month variable LIBOR contracts for a fixed three year
rate of 2.962%.  On April 23, 2008, the Company elected to settle this
derivative instrument in accordance with the agreement.  The company
received $2.4 million on April 25, 2008 as a result of this
settlement.  The offset is included in other comprehensive income and
will be amortized over the contract period to interest expense.





The
Company concluded that it met the hedge accounting criteria for accounting for
these interest rate swaps transactions.  The Company estimates the
fair value of the interest rate swap transactions identified above to be a
liability of $32.3 million and $4.9 million as of March 29, 2008 and September
29, 2007, respectively, which is reflected as a part of other long-term
liabilities on the accompanying consolidated balance sheet with an offset, net
of tax, to accumulated other comprehensive income (loss). The fair value is
estimated by calculating the difference between the present value of the forward
LIBOR curve and the present value of the fixed rate payments that the Company
will make over the life of the agreements. The fair value is an estimate of the
net amount that the Company would be required to pay on March 29, 2008, if the
agreements were transferred to other parties or cancelled by the
Company.





8.         Stockholders’
Equity and Stock Option Plans





In
connection with the Apollo Berry Merger, Apollo and Graham and certain employees
who invested in Old Berry Group entered into a stockholders
agreement.  The stockholders agreement provides for, among other
things, a restriction on the transferability of each such person’s equity
ownership in us, tag-along rights, drag-along rights, piggyback registration
rights and repurchase rights by Berry Group in certain
circumstances.





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





In
connection with the Berry Covalence Merger, Berry Group modified its outstanding
stock options to provide for (i) the vesting of an additional twenty percent
(20%) of the total number of shares underlying such outstanding options; (ii)
the conversion of options with escalating exercise prices to a fixed priced
option, with no increase in the exercise price as of the date of grant of such
escalating priced option; and (iii) with respect to each outstanding option, the
vesting of which was contingent upon the achievement of performance goals, the
deemed achievement of all such performance goals.  On June 7, 2007,
Berry Group’s Board of Directors declared a special one-time dividend of $77 per
common share and option to shareholders of record as of June 6,
2007.  This dividend reduced Berry


21


Group’s
shareholders equity for owned shares by $530.2 million.  The Company
recorded stock compensation expense of $9.3 million and $0.8 million for the
twenty-six weeks ended March 29, 2008 and March 31, 2007,
respectively.





9.      Comprehensive
Income (Loss)





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





Thirteen
      Weeks Ended
            
            
            Twenty-Six
      Weeks EndedMarch
      29,
              2008
            
            
            March
      31,
              2007
            
            
            March
      29,
              2008
            
            
            March
      31,
              2007Net
      loss
            
            $
            (29.3
            )
            
            $
            (13.6
            )
            
            $
            (60.6
            )
            
            $
            (44.4
            )Other
      comprehensive income (losses)
            
            
            (11.1
            )
            
            
            0.1
            
            
            
            (16.7
            )
            
            
            0.6Currency
      translation income (loss)
            
            
            (2.2
            )
            
            
            (0.5
            )
            
            
            0.1
            
            
            
            0.9Comprehensive
      loss
            
            $
            (42.6
            )
            
            $
            (14.0
            )
            
            $
            (77.2
            )
            
            $
            (42.9
            )





22





10.
Income Taxes





The
effective tax rate was 37.5% and 36.3% for the thirteen weeks ended March 29,
2008 and March 31, 2007, respectively.  A reconciliation of income tax
benefit, computed at the federal statutory rate, to income tax benefit, as
provided for in the financial statements, is as follows:





Thirteen
      Weeks Ended
            
            
            Twenty-Six
      Weeks EndedMarch
      29,
              2008
            
            
            March
      31,
              2007
            
            
            March
      29,
              2008
            
            
            March
      31,
              2007Income
      tax benefit computed at statutory rate
            
            $
            (16.1
            )
            
            $
            (7.5
            )
            
            $
            (34.0
            )
            
            $
            (25.9
            )State
      income tax benefit, net of federal taxes
            
            
            (0.6
            )
            
            
            (0.5
            )
            
            
            (1.3
            )
            
            
            (2.9
            )Expenses
      not deductible for income tax purposes
            
            
            0.2
            
            
            
            0.2
            
            
            
            0.3
            
            
            
            —Change
      in valuation allowance
            
            
            —
            
            
            
            0.5
            
            
            
            1.0
            
            
            
            1.6Other
            
            
            (0.2
            )
            
            
            —
            
            
            
            (2.4
            )
            
            
            (2.1
            )Income
      tax benefit
            
            $
            (16.7
            )
            
            $
            (7.3
            )
            
            $
            (36.4
            )
            
            $
            (29.3
            )





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





11.
Employee Retirement Plans





Thirteen
      Weeks Ended
            
            
            Twenty-Six
      Weeks EndedMarch
      29,
              2008
            
            
            March
      31,
              2007
            
            
            March
      29,
              2008
            
            
            March
      31,
              2007Components
      of net period benefit cost:Defined
      Benefit Pension PlansService cost
            
            $
            —
            
            
            $
            0.1
            
            
            $
            —
            
            
            $
            0.1Interest cost
            
            
            0.5
            
            
            
            0.6
            
            
            
            1.0
            
            
            
            1.1Expected return on plan
      assets
            
            
            (0.6
            )
            
            
            (0.6
            )
            
            
            (1.2
            )
            
            
            (1.4
            )Net periodic benefit
      cost
            
            $
            (0.1
            )
            
            $
            0.1
            
            
            $
            (0.2
            )
            
            $
            (0.2
            )Retiree
      Health Benefit PlanService cost
            
            $
            —
            
            
            $
            —
            
            
            $
            —
            
            
            $
            —Interest cost
            
            
            0.1
            
            
            
            0.1
            
            
            
            0.2
            
            
            
            0.2Recognized
      actuarial loss
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Net periodic benefit
      cost
            
            $
            0.1
            
            
            $
            0.1
            
            
            $
            0.2
            
            
            $
            0.2





The
Company expects to contribute approximately $2.8 million during fiscal 2008, of
which $0.9 million and $1.1 million was made in the thirteen and twenty-six
weeks ended March 29, 2008 to the


23


defined
benefit pension plans and the retiree health benefit plan.





12.
Sale-leaseback Transaction





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


24


13.
Operating Segments





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





Thirteen
      Weeks Ended
            
            
            Twenty-Six
      Weeks EndedMarch
      29,
              2008
            
            
            March
      31,
              2007
            
            
            March
      29,
              2008
            
            
            March
      31,
              2007Net
      sales:Rigid Open Top
            
            $
            247.9
            
            
            $
            219.5
            
            
            $
            471.1
            
            
            $
            413.2Rigid Closed
Top
            
            
            211.2
            
            
            
            155.2
            
            
            
            359.6
            
            
            
            298.4Flexible Films
            
            
            257.8
            
            
            
            229.2
            
            
            
            528.2
            
            
            
            475.3Tapes/Coatings
            
            
            127.4
            
            
            
            140.0
            
            
            
            248.1
            
            
            
            262.1Intercompany
            
            
            —
            
            
            
            (2.3
            )
            
            
            —
            
            
            
            (3.8
            )Total net sales
            
            $
            844.3
            
            
            $
            741.6
            
            
            $
            1,607.0
            
            
            $
            1,445.2Operating
      income (loss):Rigid Open Top
            
            $
            15.4
            
            
            $
            29.3
            
            
            $
            25.5
            
            
            $
            45.1Rigid Closed
Top
            
            
            8.2
            
            
            
            15.5
            
            
            
            15.2
            
            
            
            25.0Flexible Films
            
            
            (3.2
            )
            
            
            0.2
            
            
            
            (8.8
            )
            
            
            (8.7
            )Tapes/Coatings
            
            
            0.8
            
            
            
            (2.1
            )
            
            
            (0.2
            )
            
            
            (5.2
            )Corporate
            
            
            —
            
            
            
            (5.3
            )
            
            
            —
            
            
            
            (11.1
            )Total operating
      income
            
            $
            21.2
            
            
            $
            37.6
            
            
            $
            31.7
            
            
            $
            45.1Depreciation
      and amortization:Rigid Open Top
            
            $
            20.3
            
            
            $
            15.3
            
            
            $
            43.6
            
            
            $
            32.3Rigid Closed
Top
            
            
            22.5
            
            
            
            13.7
            
            
            
            38.6
            
            
            
            25.5Flexible Films
            
            
            11.1
            
            
            
            11.1
            
            
            
            22.1
            
            
            
            21.9Tapes/Coatings
            
            
            9.1
            
            
            
            8.8
            
            
            
            18.3
            
            
            
            17.8Corporate
            
            
            —
            
            
            
            0.5
            
            
            
            —
            
            
            
            1.0Total depreciation and
      amortization
            
            $
            63.0
            
            
            $
            49.4
            
            
            $
            122.6
            
            
            $
            98.5








March
      29,
              2008
            
            
            September
      29,
              2007Total
      assets:Rigid Open Top
            
            $
            1,761.6
            
            
            $
            1,746.6Rigid Closed
Top
            
            
            1,624.7
            
            
            
            1,024.5Flexible Films
            
            
            642.5
            
            
            
            683.5Tapes/Coatings
            
            
            423.1
            
            
            
            414.8Total assets
            
            $
            4,451.9
            
            
            $
            3,869.4





25





14.            Condensed
Consolidating or Combined Financial Information





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





March
      29, 2008Parent
              Company
            
            
            Combined
              Guarantor
              Subsidiaries
            
            
            Combined
              Non-guarantor
      Subsidiaries
            
            
            Eliminations
            
            
            ConsolidatedConsolidating
      Balance SheetCurrent
      assets
            
            $
            262.7
            
            
            $
            576.9
            
            
            $
            97.4
            
            
            $
            —
            
            
            $
            937.0Net
      property and equipment
            
            
            216.6
            
            
            
            597.0
            
            
            
            54.9
            
            
            
            —
            
            
            
            868.5Other
      noncurrent assets
            
            
            3,405.7
            
            
            
            2,370.4
            
            
            
            61.2
            
            
            
            (3,190.9
            )
            
            
            2,646.4Total
      assets
            
            $
            3,885.0
            
            
            $
            3,544.3
            
            
            $
            213.5
            
            
            $
            (3,190.9
            )
            
            $
            4,451.9Current
      liabilities
            
            $
            156.0
            
            
            $
            289.5
            
            
            $
            34.1
            
            
            $
            —
            
            
            $
            479.6Noncurrent
      liabilities
            
            
            3,348.6
            
            
            
            234.6
            
            
            
            8.7
            
            
            
            —
            
            
            
            3,591.9Equity
      (deficit)
            
            
            380.4
            
            
            
            3,020.2
            
            
            
            170.7
            
            
            
            (3,190.9
            )
            
            
            380.4Total
      liabilities and equity (deficit)
            
            $
            3,885.0
            
            
            $
            3,544.3
            
            
            $
            213.5
            
            
            $
            (3,190.9
            )
            
            $
            4,451.9





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











26





Thirteen
      Weeks Ended March 29, 2008Parent
              Company
            
            
            Combined
              Guarantor
              Subsidiaries
            
            
            Combined
              Non-guarantor
      Subsidiaries
            
            
            Eliminations
            
            
            ConsolidatedConsolidating
      Statement of OperationsNet
      sales
            
            $
            236.8
            
            
            $
            542.4
            
            
            $
            65.1
            
            
            $
            —
            
            
            $
            844.3Cost
      of goods sold
            
            
            220.0
            
            
            
            453.9
            
            
            
            58.0
            
            
            
            —
            
            
            
            731.9Gross
      profit
            
            
            16.8
            
            
            
            88.5
            
            
            
            7.1
            
            
            
            —
            
            
            
            112.4Selling
      , general, and administrative expense
            
            
            23.0
            
            
            
            53.9
            
            
            
            6..7
            
            
            
            —
            
            
            
            83.6Restructuring
      and impairment charges
            
            
            1.7
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            1.7Operating
      expenses
            
            
            0.2
            
            
            
            4.0
            
            
            
            1.7
            
            
            
            —
            
            
            
            5.9Operating
      income (loss)
            
            
            (8.1
            )
            
            
            30.6
            
            
            
            (1.3
            )
            
            
            —
            
            
            
            21.2Interest
      expense (income), net
            
            
            74.7
            
            
            
            (10.1
            )
            
            
            2.6
            
            
            
            —
            
            
            
            67.2Income
      taxes (benefit)
            
            
            0.1
            
            
            
            (17.0
            )
            
            
            0.2
            
            
            
            —
            
            
            
            (16.7
            )Net
      income (loss)
            
            $
            (82.9
            )
            
            $
            57.7
            
            
            $
            (4.1
            )
            
            $
            —
            
            
            $
            (29.3
            )











Thirteen
      Weeks Ended March 31, 2007Parent
              Company
            
            
            Combined
              Guarantor
              Subsidiaries
            
            
            Combined
              Non-guarantor
      Subsidiaries
            
            
            Eliminations
            
            
            ConsolidatedConsolidating
      Statement of OperationsNet
      sales
            
            $
            230.3
            
            
            $
            462.2
            
            
            $
            47.5
            
            
            $
            1.6
            
            
            $
            741.6Cost
      of goods sold
            
            
            209.9
            
            
            
            366.9
            
            
            
            41.9
            
            
            
            1.2
            
            
            
            619.9Gross
      profit
            
            
            20.4
            
            
            
            95.3
            
            
            
            5.6
            
            
            
            0.4
            
            
            
            121.7Selling
      , general, and administrative expense
            
            
            41.7
            
            
            
            31.9
            
            
            
            3.8
            
            
            
            (0.5
            )
            
            
            76.9Restructuring
      and impairment charges
            
            
            3.8
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            3.8Operating
      expenses
            
            
            0.4
            
            
            
            2.9
            
            
            
            0.1
            
            
            
            —
            
            
            
            3.4Operating
      income (loss)
            
            
            (25.5
            )
            
            
            60.5
            
            
            
            1.7
            
            
            
            0.9
            
            
            
            37.6Other
      expenses
            
            
            —
            
            
            
            —
            
            
            
            (0.1
            )
            
            
            —
            
            
            
            (0.1
            )Interest
      expense (income), net
            
            
            96.2
            
            
            
            (17.8
            )
            
            
            0.9
            
            
            
            (20.2
            )
            
            
            59.1Minority
      interest
            
            
            (0.5
            )
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (0.5
            )Income
      taxes (benefit)
            
            
            (4.7
            )
            
            
            (3.8
            )
            
            
            1.2
            
            
            
            —
            
            
            
            (7.3
            )Net
      income (loss)
            
            $
            (116.5
            )
            
            $
            82.1
            
            
            $
            (0.3
            )
            
            $
            21.1
            
            
            $
            (13.6
            )


























27





Twenty-Six
      Weeks Ended March 29, 2008Parent
              Company
            
            
            Combined
              Guarantor
              Subsidiaries
            
            
            Combined
              Non-guarantor
      Subsidiaries
            
            
            Eliminations
            
            
            ConsolidatedConsolidating
      Statement of OperationsNet
      sales
            
            $
            479.2
            
            
            $
            1,011.7
            
            
            $
            116.1
            
            
            $
            —
            
            
            $
            1,607.0Cost
      of goods sold
            
            
            439.0
            
            
            
            841.2
            
            
            
            105.6
            
            
            
            —
            
            
            
            1,385.8Gross
      profit
            
            
            40.2
            
            
            
            170.5
            
            
            
            10.5
            
            
            
            —
            
            
            
            221.2Selling
      , general, and administrative expense
            
            
            47.9
            
            
            
            106.6
            
            
            
            10.9
            
            
            
            —
            
            
            
            165.4Restructuring
      and impairment charges
            
            
            5.2
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            5.2Operating
      expenses
            
            
            9.3
            
            
            
            7.3
            
            
            
            2.3
            
            
            
            —
            
            
            
            18.9Operating
      income (loss)
            
            
            (22.2
            )
            
            
            56.6
            
            
            
            (2.7
            )
            
            
            —
            
            
            
            31.7Interest
      expense (income), net
            
            
            152.4
            
            
            
            (27.3
            )
            
            
            3.6
            
            
            
            —
            
            
            
            128.7Income
      taxes (benefit)
            
            
            0.2
            
            
            
            (37.7
            )
            
            
            1.1
            
            
            
            —
            
            
            
            (36.4
            )Net
      income (loss)
            
            $
            (174.8
            )
            
            $
            121.6
            
            
            $
            (7.4
            )
            
            $
            —
            
            
            $
            (60.6
            )





Consolidating
      Statement of Cash FlowsNet
      cash flow from operating activities
            
            $
            7.8
            
            
            $
            (16.5
            )
            
            $
            9.2
            
            
            $
            —
            
            
            $
            0.5Investing
      activities:Purchase
      of property, plant, and equipment
            
            
            (23.9
            )
            
            
            (53.4
            )
            
            
            (1.1
            )
            
            
            —
            
            
            
            (78.4
            )Proceeds
      from disposal of assets
            
            
            —
            
            
            
            82.0
            
            
            
            —
            
            
            
            —
            
            
            
            82.0Acquisition
      of business net of cash acquired
            
            
            (577.8
            )
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (577.8
            )Net
      cash flow from investing activities
            
            
            (601.7
            )
            
            
            28.6
            
            
            
            (1.1
            )
            
            
            —
            
            
            
            (574.2
            )Financing
      activities:Proceeds
      from long-term borrowings
            
            
            607.4
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            607.4Payments
      on long-term borrowings
            
            
            —
            
            
            
            (13.4
            )
            
            
            (0.5
            )
            
            
            —
            
            
            
            (13.9
            )Debt
      financing costs
            
            
            (12.9
            )
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (12.9
            )Equity
      contributions (distributions), net
            
            
            (1.7
            )
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (1.7
            )Net
      cash flow from financing activities
            
            
            592.8
            
            
            
            (13.4
            )
            
            
            (0.5
            )
            
            
            —
            
            
            
            578.9Effect
      of exchange rate changes on cash
            
            
            —
            
            
            
            —
            
            
            
            (0.3
            )
            
            
            —
            
            
            
            (0.3
            )Net
      increase (decrease) in cash and cash equivalents
            
            
            (1.1
            )
            
            
            (1.3
            )
            
            
            7.3
            
            
            
            —
            
            
            
            4.9Cash
      and cash equivalents at beginning of period
            
            
            0.9
            
            
            
            7.7
            
            
            
            6.0
            
            
            
            —
            
            
            
            14.6Cash
      and cash equivalents at end of period
            
            $
            (0.2
            )
            
            $
            6.4
            
            
            $
            13.3
            
            
            $
            3⁄4
            
            
            $
            19.5








28





Twenty-Six
      Weeks Ended March 31, 2007Parent
              Company
            
            
            Combined
              Guarantor
              Subsidiaries
            
            
            Combined
              Non-guarantor
      Subsidiaries
            
            
            Eliminations
            
            
            ConsolidatedCombined
      Statement of OperationsNet
      sales
            
            $
            467.4
            
            
            $
            892.8
            
            
            $
            90.9
            
            
            $
            (5.9
            )
            
            $
            1,445.2Cost
      of goods sold
            
            
            436.2
            
            
            
            723.4
            
            
            
            83.4
            
            
            
            (5.9
            )
            
            
            1,237.1Gross
      profit
            
            
            31.2
            
            
            
            169.4
            
            
            
            7.5
            
            
            
            —
            
            
            
            208.1Selling,
      general and administrative expense
            
            
            61.7
            
            
            
            82.7
            
            
            
            7.5
            
            
            
            (0.5
            )
            
            
            151.4Restructuring
      and impairment charges
            
            
            4.1
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            4.1Other
      operating expenses
            
            
            0.7
            
            
            
            6.7
            
            
            
            0.1
            
            
            
            —
            
            
            
            7.5Operating
      income (loss)
            
            
            (35.3
            )
            
            
            80.0
            
            
            
            (0.1
            )
            
            
            0.5
            
            
            
            45.1Other
      expense (income)
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —Interest
      expense, net
            
            
            139.2
            
            
            
            (1.2
            )
            
            
            1.2
            
            
            
            (20.2
            )
            
            
            119.0Income
      taxes (benefit)
            
            
            (18.0
            )
            
            
            (10.3
            )
            
            
            1.5
            
            
            
            —
            
            
            
            (26.8
            )Minority
      interest
            
            
            (2.7
            )
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (2.7
            )Equity
      in net (income) loss from subsidiary
            
            
            95.6
            
            
            
            0.1
            
            
            
            —
            
            
            
            (95.7
            )
            
            
            —Net
      income (loss)
            
            $
            (249.4
            )
            
            $
            91.4
            
            
            $
            (2.8
            )
            
            $
            116.4
            
            
            $
            (44.4
            )





Combined
      Statement of Cash FlowsNet
      cash flow from operating activities
            
            $
            16.1
            
            
            $
            76.1
            
            
            $
            (2.6
            )
            
            
            —
            
            
            $
            89.6Investing
      activities:Purchase
      of property, plant, and equipment
            
            
            (14.5
            )
            
            
            (24.5
            )
            
            
            (0.6
            )
            
            
            —
            
            
            
            (39.6
            )Acquisition
      of business net of cash acquired
            
            
            (35.4
            )
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (35.4
            )Net
      cash flow from investing activities
            
            
            (49.9
            )
            
            
            (24.5
            )
            
            
            (0.6
            )
            
            
            —
            
            
            
            (75.0
            )Financing
      activities:Payments
      on long-term borrowings
            
            
            28.3
            
            
            
            (57.4
            )
            
            
            1.5
            
            
            
            —
            
            
            
            (27.6
            )Issuance
      of common stock
            
            
            0.6
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            0.6Equity
      contributions (distributions), net
            
            
            (1.3
            )
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (1.3
            )Net
      cash flow from financing activities
            
            
            27.6
            
            
            
            (57.4
            )
            
            
            1.5
            
            
            
            —
            
            
            
            (28.3
            )Effect
      of exchange rate changes on cash
            
            
            —
            
            
            
            —
            
            
            
            0.2
            
            
            
            —
            
            
            
            0.2Net
      increase (decrease) in cash and cash equivalents
            
            
            (6.2
            )
            
            
            (5.8
            )
            
            
            (1.5
            )
            
            
            —
            
            
            
            (13.5
            )Cash
      and cash equivalents at beginning of period
            
            
            62.3
            
            
            
            15.0
            
            
            
            5.8
            
            
            
            —
            
            
            
            83.1Cash
      and cash equivalents at end of period
            
            $
            56.1
            
            
            $
            9.2
            
            
            $
            4.3
            
            
            $
            3⁄4
            
            
            $
            69.6





29





15.            Contingencies





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





16.         Recent
Financial Accounting Standards





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





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





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





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


30


periods
within those fiscal years, beginning on or after December 15,
2008.  Based on current conditions, we do not expect the adoption of
SFAS 160 to have a significant impact on the Company’s results of operations or
financial position.





17.         Subsequent
Events





On April
21, 2008 the Company completed a private placement of $680.6 million, aggregate
principal amount of a priority floating rate senior secured
notes.  The Company received gross proceeds of $661.3 million, before
expenses, and repaid the outstanding borrowings under the Senior Secured Bridge
Loan that was used to finance and pay costs related to the Company’s acquisition
of Captive and to repay amounts outstanding under the Company’s revolving credit
facility as well as to pay fees and expenses related to the
offering.




The
Senior Secured First Priority Notes are guaranteed on a senior secured basis by
all of the Company’s existing and future domestic subsidiaries, subject to
certain exceptions and will include all of the Company’s subsidiaries that
guarantee the Company’s obligations under its term loan facility. The Senior
Notes and the guarantees are general senior obligations and rank senior in right
of payment to all of the Company’s, and, in the case of the guarantees, to all
of the guarantors’, existing and future subordinated debt and the Second
Priority Senior Secured Notes. The Senior Secured First Priority Notes and the
guarantees are secured on a first-priority basis by a lien on the assets that
secure the Company’s obligations under its senior secured credit facilities,
subject to certain exceptions.  The Senior Secured First Priority
Notes mature on February 15, 2015 and interest is payable at LIBOR plus 475
basis points, reset quarterly, per annum, in each case, on January 15, April 15,
July 15 and October 15 of each year, beginning on July 15, 2008.





On April
23, 2008, the Company terminated its three-year interest rate swap agreement
($300 million notional amount) entered into with Deutsche Bank AG on January 22,
2008.  The Company received $2.4 million on April 25, 2008, as a
result of the termination of the swap agreement.








31


Item
      2.


Management’s
Discussion and Analysis of Financial Condition and


Results
of Operations





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





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





Critical
Accounting Policies





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





Allowance for doubtful
accounts.  We evaluate our allowance for doubtful accounts on
an ongoing basis and review any significant customers with delinquent balances
to determine future collectibility.  We base our determinations on
legal issues (such as bankruptcy status), past history, current financial and
credit agency reports, and the experience of our credit
representatives.  We


32


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 $11.4 million as of March 29, 2008 and $11.3
million as of September 29, 2007.





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 $15.0 million and $14.9 million as of March 29, 2008 and
September 29, 2007, respectively.





Medical
insurance.  We offer our employees medical insurance that is
primarily self-insured by us.  As a result, we accrue a liability for
known claims as well as the estimated amount of expected claims incurred but not
reported.  We evaluate our medical claims liability on an ongoing
basis, obtain an independent actuarial analysis on an annual basis and perform
payment lag analysis.  Based on our analysis, we believe that our
recorded medical claims liability should be sufficient.  A ten percent
increase or decrease in our medical claims experience would not have a material
impact on the results of operations of the Company.   Our accrued
liability for medical claims was $4.3 million and $6.7 million, including
reserves for expected medical claims incurred but not reported, as of March 29,
2008 and September 29, 2007, respectively.





Workers’ compensation
insurance.  The majority of our facilities are in a large
deductible program for workers’ compensation insurance.  On a
quarterly basis, we evaluate our liability based on third-party adjusters’
independent analyses by claim.  Based on our analysis, we believe that
our recorded workers’ compensation liability should be sufficient.  A
ten percent increase or decrease in our workers’ compensations claims experience
would not have a material impact on the results of operations of the
Company.   Our accrued liability for workers’ compensation claims
was $7.4 million and $6.7 million as of March 29, 2008 and September
29, 2007, respectively.





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





Impairments of Long-Lived
Assets.  In accordance with the methodology described
in 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.


33


Goodwill and Other Indefinite Lived
Intangible Assets. In accordance with the methodology described in SFAS
No. 142, “Goodwill and Other Intangible Assets”, we evaluate our goodwill and
other indefinite lived intangible assets for impairment whenever events, changes
in circumstances, or our annual review indicate the carrying amount of such
assets may not be recoverable.  We evaluate impairment of goodwill by
comparing its estimated fair value to its carrying value. We estimate fair value
by computing the expected future discounted operating cash flows based on
historical result trends. The estimates of future cash flows involve
considerable management judgment and are based upon assumptions about future
operating performance. The actual cash flows could differ from management’s
estimates due to changes in business conditions, operating performance, economic
conditions and other factors. Changes in these estimates and assumptions could
materially affect the determination of fair value. Impairment of our goodwill
could significantly affect our operating results and financial position.
Goodwill totaled $1,567.8 million at March 29, 2008.  No
impairment was recorded during the twenty-six week periods ended March 29, 2008
or March 31, 2007, respectively.





Deferred Taxes and Effective Tax
Rates. We estimate the effective tax rates and associated liabilities or
assets for each legal entity of ours in accordance with SFAS No.
109.  We use tax-planning to minimize or defer tax liabilities to
future periods. In recording effective tax rates and related liabilities and
assets, we rely upon estimates, which are based upon our interpretation of
United States, foreign, state, and local tax laws as they apply to our legal
entities and our overall tax structure.  Audits by local tax
jurisdictions, including the United States Government, could yield different
interpretations from our own and cause the Company to owe more taxes than
originally recorded.  For interim periods, we accrue our tax provision
at the effective tax rate that we expect for the full year.  As the
actual results from our various businesses vary from our estimates earlier in
the year, we adjust the succeeding interim periods’ effective tax rates to
reflect our best estimate for the year-to-date results and for the full
year.  As part of the effective tax rate, if we determine that a
deferred tax asset arising from temporary differences is not likely to be
utilized, we will establish a valuation allowance against that asset to record
it at its expected realizable value.  Our valuation allowance against
deferred tax assets was $4.1 million and $3.1 million as of March 29, 2008 and
September 29, 2007, respectively.





Accrued
Rebates.  We offer various rebates to our customers in exchange
for their purchases.  These rebates are individually negotiated with
our customers and contain a variety of different terms and
conditions.  Certain rebates are calculated as a flat percentage of
purchases, while others included tiered volume incentives.  These
rebates may be payable monthly, quarterly, or annually.  The
calculation of the accrued rebate balance involves significant management
estimates, especially where the terms of the rebate involve tiered volume levels
that require estimates of expected annual sales.  These provisions are
based on estimates derived from current program requirements and historical
experience.  We use all available information when calculating these
reserves.  Our accrual for customer rebates was $33.1 million and
$35.9 million as of March 29, 2008 and September 29, 2007,
respectively.





Pension.  Pension
benefit costs include assumptions for the discount rate, retirement age, and
expected return on plan assets.  Retiree medical plan costs include
assumptions for the discount rate, retirement age, and health-care-cost trend
rates.  These assumptions have a significant effect on the 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


34


evaluation
of the discount rates, expected return on plan assets, health-care-cost trend
rates of other companies, our historical assumptions compared with actual
results, an analysis of asset allocations based on current market conditions
and the views of advisers.  In evaluating our expected retirement
age assumption, we consider the retirement ages of our past employees eligible
for pension and medical benefits together with our expectations of future
retirement ages.  We believe our pension and retiree medical plan
assumptions are appropriate based upon the above factors.  A one
percent increase or decrease in our health-care-cost trend rates would not have
a material impact on the results of operations of the Company.  Also,
a one quarter percentage point change in our discount rate or expected return on
plan assets would not have a material impact on the results of operations of the
Company.





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





Acquisitions





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





Recent
Developments





Rollpak


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


35





Acquisition
of MAC Closures, Inc.


On
December 19, 2007, the Company acquired 100% of the outstanding common stock of
MAC Closures, Inc. (“MAC”), a plastic cap and closure manufacturer with
operations located in Waterloo, Quebec and Oakville, Ontario.  MAC is
a fully integrated manufacturer of injection molded plastic caps and closures
primarily serving the pharmaceutical, nutraceutical, personal care, amenity, and
household and industrial chemical industries with calendar year 2007 sales of
$37.1 million.  MAC manufactures stock and custom products for U.S.
and Canadian based private and national brand owners, distributors and other
packaging suppliers.  The purchase price was funded utilizing cash on
hand from the sale-leaseback transaction discussed in the Notes to the
Consolidated or Combined Financial Statements section of this Form
10-Q.  The MAC acquisition has been accounted for under the purchase
method of accounting, and accordingly, the purchase price has been allocated to
the identifiable assets and liabilities based on estimated fair values at the
acquisition date.  The allocation is preliminary and subject to
change.





Acquisition
of Captive Holdings, Inc.


On
February 5, 2008, the Company completed its acquisition of 100% of the
outstanding capital stock of Captive Holdings, Inc., which is the sole
stockholder of Captive Plastics, Inc. (“Captive”).  Captive is a
manufacturer of blow-molded bottles and injection-molded closures for the food,
healthcare, spirits and personal care end markets with annual net sales of
approximately $290.3 million in calendar 2007.  The purchase price was
funded utilizing the proceeds of the senior secured bridge loan facility
discussed in the Notes to the Consolidated or Combined Financial Statements
section of this Form 10-Q.





Results
of Operations





Comparison
of the 13 Weeks Ended March 29, 2008 (the “Quarter”) and the 13 Weeks Ended
March 31, 2007 (the “Prior Quarter”)





Net Sales.  Net
sales increased 14% to $844.3 million for the Quarter from $741.6 million for
the Prior Quarter.  This $102.7 million increase
includes acquisition volume growth of 9%.  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
$219.5 million in the Prior Quarter to $247.9 million in the
Quarter.  Base volume growth in the rigid open top business, excluding
net selling price increases, was 5% driven primarily by growth in our various
container product lines and thermoformed drink cups.  Net sales in the
rigid closed top business increased from $155.2 million in the Prior
Quarter to $211.2 million in the Quarter primarily as a result of acquisition
volume growth attributed to Captive and MAC totaling $51.0 million for the
Quarter.  The flexible film business net sales increased from $229.2
million in the Prior Quarter to $257.8 million in the
Quarter.  Acquisition volume growth attributed to Rollpak was $14.3
million for the Quarter.  Base volume declined, excluding net selling
price increases, by 11% for the Quarter primarily due to softness in the housing
market and the Company’s decision to discontinue historically lower margin
business.  Net sales in the tapes/coatings business decreased from
$137.7 million in the Prior Quarter to $127.4 million in the Quarter primarily
driven by softness in the new home construction and automotive markets partially
offset by strong volume growth in the corrosion protection
business.





Gross Profit.  Gross
profit decreased by $9.3 million to $112.4 million (13% of net sales) for the
Quarter from $121.7 million (16% of net sales) for the Prior
Quarter.  This decrease is primarily


36


attributed
to the timing lag of passing through increased raw material costs to customers
as well as $2.4 million of purchase accounting inventory adjustments related to
the acquisitions of Captive and MAC partially offset by additional sales volume
noted above and productivity improvements in the flexible films and
tapes/coatings segments as a result of realizing synergies from the Berry
Covalence Merger.





Operating
Expenses.  Selling, general and administrative expenses
increased by $6.7 million to $83.6 million for the Quarter from $76.9 million
for the Prior Quarter primarily the result of a $4.2 million increase in stock
compensation expense in the Quarter over the Prior Quarter, a $3.7 million
increase in amortization of intangible assets and an $8.4 million increase
attributed to acquisition volume substantially offset by realization of
synergies from the Berry Covalence Merger.  Restructuring and
impairment charges were $1.7 million in the Quarter primarily as a result of
costs incurred associated with the plant consolidations within the flexible
films and tapes/coatings segments.  Other expenses increased from $3.4
million in the Prior Quarter to $5.9 million for the Quarter as a result of
expenses associated with the integration of Old Covalence and the corresponding
achievement of synergies.





Interest Expense,
Net.  Net interest expense increased $8.1 million to $67.2
million for the Quarter from $59.1 million in the Prior Quarter primarily as a
result of increased borrowings to finance the Captive acquisition.





Income Tax
Benefit.For the Quarter, we recorded an income tax benefit of
$16.7 million or an effective tax rate of 36.3%, which is a change of $9.4
million from the income tax benefit of $7.3 million or an effective tax rate of
34.1% in the Prior Quarter.





Net Loss.  Net loss
was $29.3 million for the Quarter compared to a net loss of $13.6 million for
the Prior Quarter for the reasons discussed above.





26
Weeks Ended March 29, 2008 (“YTD”) Compared to the 26 Weeks
Ended March 31, 2007 (“Prior YTD”)





Net Sales.  Net
sales increased 11% to $1,607.0 million for the YTD from $1,445.2 million for
the Prior YTD.  This $161.8 million increase includes 6% acquisition
related volume growth.  The following discussion in this section
provides a comparison of net sales by business segment.  Net sales in
the rigid open top business increased from $413.2 million in the Prior YTD to
$471.1 million in the YTD.  Base volume growth in the rigid open top
business, excluding net selling price increases, was strong at 8% driven
primarily by growth in our various container product lines, housewares, and
thermoformed drink cups.  Net sales in the rigid closed top business
increased from $298.4 million in the Prior YTD to $359.6 million in the
YTD.  Base volume growth in the rigid closed top business, excluding
net selling price increases, was 2% for the YTD driven by growth in bottles and
closures.  The flexible film business net sales increased from $475.2
million in the Prior YTD to $528.2 million in the YTD.  Acquisition
volume growth attributing to Rollpak was $29.0 million for the
YTD.  Base volume growth declined, excluding net selling price
increases, by 5% for the  YTD primarily due to softness in the housing
market and the Company’s decision to discontinue historically lower margin
business.  Net sales in the tapes/coatings business decreased slightly
from $258.3 million in the Prior YTD to $248.1 million in the YTD primarily
driven by softness in the new home construction and automotive markets partially
offset by strong volume growth in the corrosion protection
business.


37


Gross Profit.  Gross
profit increased by $13.1 million to $221.2 million (14% of net sales) for the
YTD from $208.1 million (14% of net sales) for the Prior YTD.  This
increase is primarily the result of the additional sales volume noted above and
productivity improvements in the flexible films and tapes/coatings segments as a
result of realizing synergies from the Berry Covalence Merger.  These
productivity improvements were partially offset by the timing lag of passing
through increased raw material costs to customers and increased costs from
inflationary pressures.





Operating
Expenses.  Selling, general and administrative expenses
increased by $14.0 million to $165.4 million for the YTD from $151.4 million for
the Prior YTD primarily the result of a $8.8 million increase in stock
compensation expense in the YTD over the Prior YTD, a $7.8 million increase in
amortization of intangible assets, and increased expenses as a result of the
organic and acquisition growth partially offset by realization of synergies from
the Berry Covalence Merger.  Restructuring and impairment charges were
$5.2 million in the YTD primarily as a result of costs incurred associated with
the plant consolidations within the flexible films and tapes/coatings
segments.  Other expenses increased from $7.5 million in the Prior YTD
to $18.9 million for the YTD primarily as a result of expenses associated with
the integration of Old Covalence and the corresponding achievement of
synergies.





InterestExpense, Net.  Net
interest expense increased $9.7 million to $128.7 million for the YTD from
$119.0 million in the Prior YTD primarily as a result of increased borrowings to
finance the Captive acquisition.





Income Tax
Benefit.For the YTD, we recorded an income tax benefit of
$36.4 million or an effective tax rate of 37.5 %, which is a change of $9.6
million from the income tax benefit of $26.8 million or an effective tax rate of
36.3% in the Prior YTD.





Net Loss.  Net loss
was $60.6 million for the YTD compared to a net loss of $44.4 million for the
Prior YTD for the reasons discussed above.





Liquidity
and Capital Resources





Senior
Secured Credit Facility


The
Company’s senior secured credit facilities consist of $1,200.0 million term loan
and $400.0 million asset based revolving line of credit.  The
availability under the revolving line of credit is the lesser of $400.0 million
or based on a defined borrowing base which is calculated based on available
accounts receivable and inventory.  Under the revolving line of
credit, the Company is required to maintain a consolidated fixed charge coverage
ratio of at least 1.00 to 1.00 during any period when availability falls below
10% and for ten consecutive days after availability exceeds 10%.  The
term loan matures on April 3, 2015 and the revolving line of credit matures on
April 3, 2013.  The interest rate on the term loan and the line of
credit were 5.10% and 4.31% at March 29, 2008, respectively, determined by
reference to the costs of funds for eurodollar deposits in dollars in the LIBOR
for the interest period relevant to such borrowing plus the applicable
margin.  The applicable margin for LIBOR rate borrowings under the
revolving credit facility ranges from 1.00% to 1.75% and for the term loan is
2.00%.  The line of credit is also subject to an unused commitment fee
for unused borrowings ranging from 0.25% to 0.35% per annum and a letter of
credit fee of 0.125% per annum for each letter of credit that is
issued.  At March 29, 2008, there was $131.0 million outstanding on
the revolving line of credit.  The revolving line of credit allows up
to $100.0 million of letters of credit to be issued instead of borrowings under
the revolving line of credit. At March 29, 2008, the Company had $25.2 million
under the revolving line of credit in letters of


38


credit
outstanding. At March 29, 2008, the Company had unused borrowing capacity of
$243.8 million under the revolving line of credit.  The Company was in
compliance with all covenants at March 29, 2008.





A key
financial metric utilized in the calculation of the first lien leverage ratio is
Adjusted EBITDA.  The following table reconciles our Adjusted EBITDA
of $543.8 million for the twelve months ended March 29, 2008 to net
loss.





12
      months ended
              March
      29, 2008Adjusted EBITDA
            
            $
            543.8Net interest
      expense
            
            
            (247.3
            )Depreciation and
      amortization
            
            
            (244.3
            )Income tax
    benefit
            
            
            98.2Loss on extinguished
      debt
            
            
            (35.6
            )Business optimization
      expense
            
            
            (41.1
            )Restructuring and
      impairment
            
            
            (40.5
            )Stock based
      compensation
            
            
            (28.0
            )Inventory
    write-up
            
            
            (7.6
            )Management fees
            
            
            (6.4
            )Pro forma
      acquisitions
            
            
            (48.0
            )Pro forma synergies (a)
            
            
            (75.6
            )Net loss
            
            $
            (132.4
            )


(a)
Represents synergies related to the following: Covalence ($55.7 million),
Captive ($16.0 million), MAC ($2.4 million) and other ($1.5
million).





For
comparison purposes, the following table reconciles our Adjusted EBITDA for the
thirteen weeks ended March 29, 2008 and March 31, 2007.





Thirteen
      Weeks EndedMarch
      29, 2008
            
            
            March
      31, 2007Adjusted EBITDA
            
            $
            117.3
            
            
            $
            144.1Net interest
      expense
            
            
            (67.2
            )
            
            
            (59.1
            )Depreciation and
      amortization
            
            
            (63.0
            )
            
            
            (49.4
            )Income tax
    benefit
            
            
            16.7
            
            
            
            7.3Business optimization
      expense
            
            
            (4.5
            )
            
            
            (2.4
            )Restructuring and
      impairment
            
            
            (1.7
            )
            
            
            (3.8
            )Stock based
      compensation
            
            
            (4.6
            )
            
            
            (0.4
            )Inventory
    write-up
            
            
            (2.4
            )
            
            
            —Management fees
            
            
            (1.4
            )
            
            
            (1.4
            )Loss on asset
      disposal
            
            
            —
            
            
            
            (1.7
            )Minority
    interest
            
            
            —
            
            
            
            0.5Pro forma
      acquisitions
            
            
            (4.7
            )
            
            
            (18.5
            )Pro forma
    synergies
            
            
            (13.8
            )
            
            
            (28.8
            )Net loss
            
            $
            (29.3
            )
            
            $
            (13.6
            )





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


39


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





Second
Priority Senior Secured Notes


The
Company’s $750.0 million of second priority senior secured notes (“Second
Priority Notes”) are comprised of (1) $525.0 million aggregate principal amount
of 8 7/8% second priority fixed rate notes (“Fixed Rate Notes”) and (2) $225.0
million aggregate principal amount of second priority senior secured floating
rate notes (“Floating Rate Notes”).  The Second Priority Notes mature
on September 15, 2014.  Interest on the Fixed Rate Notes is due
semi-annually on March 15 and September 15. The Floating Rate Notes bear
interest at LIBOR (4.99% at March 29, 2008) plus 3.875% per annum, which
resets quarterly.  Interest on the Floating Rate Notes is payable
quarterly on March 15, June 15, September 15 and December 15
of each year. The Company was in compliance with all covenants at March 29,
2008.




Senior
Secured Bridge Loan


On
February 5, 2008, the Company entered into a Senior Secured Bridge Loan Credit
Agreement which comprised of a $520.0 million bridge loan
facility.  Interest on the bridge facility accrues at a rate equal to
an applicable margin plus, at our option, either (a) a base rate (“Base Rate”)
determined by reference to the higher of (1) the prime rate of Bank of America,
as administrative agent, and (2) the U.S. federal funds rate plus 1/2 of 1% or
(b) a eurodollar rate determined by reference to the costs of funds for
eurodollar deposits in the LIBOR for the interest period relevant to such
borrowing, adjusted for certain costs. The initial applicable margin for LIBOR
rate borrowings was 4.00% per annum, and the initial applicable rate for Base
Rate borrowings was 3.00% per annum. On April 21, 2008 the Company completed a
private placement of $680.6 million, aggregate principal amount of priority
floating rate senior secured notes.  The Company received gross
proceeds of $661.3 million, before expenses, and repaid the outstanding
borrowings under the Senior Secured Bridge Loan that was used to finance and pay
costs related to the Company’s acquisition of Captive and to repay amounts
outstanding under the Company’s revolving credit facility as well as to pay fees
and expenses related to the offering.





11%
Senior Subordinated Notes


The
Company’s $425.0 million in aggregate principal amount of 11% senior
subordinated notes (“11% Senior Subordinated Notes”) were sold in a private
placement to Goldman, Sachs and Co. and are exempt from registration under the
Securities Act.  The 11% Senior Subordinated Notes mature on
2016. Interest is payable quarterly in cash; provided, however, that on any
quarterly interest payment date on or prior to the third anniversary of the
issuance, the Company can satisfy up to 3% of the interest payable on such date
by capitalizing such interest and adding it to the outstanding principal amount
of the Senior Subordinated Notes.  The Company elected to satisfy 3%
of its interest obligation by issuing additional notes as discussed above in
satisfaction of its interest obligations for its September 2007, December 2007,
and March 2008 interest payments ($3.2 million each). The Company was in
compliance with all covenants at March 29, 2008.




40


10
1⁄4% Senior Subordinated Notes


The
Company’s $265.0 million in aggregate principal amount of 10 1⁄4% senior
subordinated notes (“10 1⁄4%
SeniorSubordinated Notes”)
mature on March 1, 2016.  The notes are senior subordinated
obligations of the Company and rank junior to all other senior indebtedness that
does not contain similar subordination provisions.  No principal
payments are required with respect to the 10 1⁄4% SeniorSubordinated Notes
prior to maturity.  Interest on the 10 1⁄4% SeniorSubordinated Notes is
due semi-annually on March 1 and September 1.  The Company was in
compliance with all covenants at March 29, 2008.




Cash
Flows


Net cash
provided by operating activities was $0.5 million for the YTD compared to $89.6
million for the Prior YTD.  This decrease of $89.1 million is
primarily the result of a $97.6 million change in working capital primarily due
to increased resin costs.





Net cash
used for investing activities increased from $75.0 million for the Prior YTD to
$574.2 million for the YTD primarily as a result of the acquisitions of Captive
and MAC and increased capital spending partially offset by proceeds from a
sale-leaseback transaction.  Our capital expenditures are forecasted
to be approximately $160.0 million for fiscal 2008.





Net cash
provided by financing activities was $578.9 million for the YTD compared to net
cash used for financing activities of $28.3 million for the Prior
YTD.  This change of $607.2 million can be primarily attributed to the
proceeds from the senior secured bridge loan discussed above.





Increased
working capital needs occur whenever we experience strong incremental demand or
a significant rise in the cost of raw material, particularly plastic
resin.  However, based on our current level of operations, we believe
that cash flow from operations and available cash, together with available
borrowings under our senior secured credit facilities, will be adequate to meet
our short-term liquidity needs over the next twelve months.  We base
such belief on historical experience and the funds available under the senior
secured credit facility.  However, we cannot predict our future
results of operations and our ability to meet our obligations involves numerous
risks and uncertainties, including, but not limited to, those described in the
“Risk Factors” section of our Form 10-K filed with the Securities and Exchange
Commission for the fiscal year ended September 29, 2007.  In
particular, increases in the cost of resin which we are unable to pass through
to our customers on a timely basis or significant acquisitions could severely
impact our liquidity.  At March 29, 2008, our cash balance was $19.5
million, and we had unused borrowing capacity of $243.8 million under our
revolving line of credit.





Item
3.      Quantitative and Qualitative Disclosures
about Market Risk





Interest
Rate Risk


We are
exposed to market risk from changes in interest rates primarily through our
senior secured credit facilities and second priority senior secured
notes.  Our senior secured credit facilities are comprised of
(i) a $1,200.0 million term loan and (ii) a $400.0 million revolving
credit facility.  At March 29, 2008, $131.0 million was outstanding on
the revolving credit facility.  The net outstanding balance of the
term loan at March 29, 2008 was $1,191.0 million.  Borrowings under
our senior secured credit facilities bear interest, at our option, at
either an alternate base rate or an adjusted LIBOR rate for a one-, two-, three-
or six month interest period, or a nine- or twelve-month period, if available to
all relevant lenders, in each case, plus an applicable margin.  The
alternate base rate is the mean the greater of (i) Credit Suisse’s
prime rate and (ii) one-half of 1.0% over the




41


weighted
average of rates on overnight Federal Funds as published by the Federal Reserve
Bank of New York.




In August
2007, Berry entered into two separate interest rate swap transactions to protect
$600.0 million of the outstanding variable rate term loan debt from future
interest rate volatility.  The swap agreements became effective in
November 2007.  The first agreement had a notional amount of $300.0
million and became effective November 5, 2007 and swaps three month variable
LIBOR contracts for a fixed two year rate of 4.875% and expires on November 5,
2009.  The second agreement had a notional amount of $300.0 million
and became effective November 5, 2007 and swaps three month variable LIBOR
contracts for a fixed three year rate of 4.920% and expires on November 5,
2010.  The adjusted LIBOR rate is determined by reference to
settlement rates established for deposits in dollars in the LIBOR for a period
equal to the interest period of the applicable loan and the maximum reserve
percentages established by the Board of Governors of the U.S. Federal Reserve to
which our lenders are subject.  Our second priority senior secured
notes are comprised of (i) $525.0 million fixed rate notes and (ii) $225.0
million floating rate notes.  The floating rate notes bear interest at
a rate of LIBOR plus 3.875% per annum, which resets
quarterly.   At March 29, 2008, the LIBOR rate applicable to the
term loan, bridge loan and floating rate notes was 5.10% and 4.99%,
respectively.  At March 29, 2008, the LIBOR rate applicable to the
revolving line of credit was 4.31%.  If the LIBOR rate increases 0.25%
and 0.5%, we estimate an annual increase in our interest expense of $2.9 million
and $5.8 million, respectively.





On January
22, 2008, Berry entered into an interest rate swap transaction to protect $300.0
million of the outstanding variable rate term loan debt from future interest
rate volatility.  The swap agreement became effective February 5,
2008.  On April 23, 2008, the Company elected to terminate this
agreement.  The Company received $2.4 million on April 25, 2008, as a
result of the termination of this agreement.





Plastic
Resin Cost Risk


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





Item
4.      Controls and Procedures





We
maintain disclosure controls and procedures that are designed to provide
reasonable assurance to our management and board of directors regarding the
preparation and fair presentation of published financial statements. Based on an
evaluation conducted under the supervision and with the participation of the
Company’s management, including our Chief Executive Officer and our Chief
Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures as of March 29, 2008, it was determined that
those controls and procedures were not effective.





In
connection with the merger and integration of Old Berry Group and Old Covalence
Holding the Company has not completed the transition from Old Covalence’s
financial system to Berry’s new financial system.  This resulted in a
not fully implemented installation of disclosure controls and procedures in one
specific area of one of the Old Covalence operating units as well as one area
of


42


income
tax accounting as it relates to the combination of the two businesses;
therefore, management’s oversight and review related to certain accounts and
analyses at one of its operating segments and the income tax provision process
was not timely or effective.  In light of the material weaknesses
described above, the Company performed additional analyses and other procedures
to ensure that the consolidated financial statements included in this Quarterly
Report were prepared in accordance with accounting principles generally accepted
in the United States ("GAAP").  These procedures included additional
testing of certain balances and accounts as of March 29, 2008 to ensure the
accuracy of the quarterly financial statements. Additionally, the Company
performed a review of its tax provision model.  As a result of these
and other expanded procedures, the Company concluded that the consolidated
financial statements included in this Quarterly Report present fairly, in all
material respects, the Company's financial position, results of operations and
cash flows for the periods presented in conformity with U.S. GAAP.





The
Company is currently transitioning and converting the legacy Old Covalence
Holding systems to the Old Berry Group systems.  Management believes
that this conversion and the transition to the Old Berry Group accounting
systems and controls will remediate the material weakness in the operating
segment financial statement close process.  The Company expects to
have this complete during fiscal 2008.





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





Part
II.  Other Information





Item
      1.
              Legal
      Proceedings
 
 There
has been no material changes in legal proceedings from the items disclosed in
our Form 10-K filed with the Securities and Exchange Commission for the fiscal
year ended September 29, 2007.


Item
1A.        Risk Factors





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







43




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


44





SIGNATURE





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





Berry Plastics
Corporation





May 12,
2008








By: /s/ James M.
Kratochvil


James M. Kratochvil




Executive
Vice President, Chief Financial Officer,


Treasurer
and Secretary (Principal Financial and


Accounting
Officer)





45