Discontinued Operations

3 Months Ended

Dec. 28, 2024

2. Discontinued Operations

As discussed in Note 1 above, on November 4, 2024, the Company completed the spin-off of HHNF and the requirements for the presentation of HHNF as a discontinued operation were met on that date. Accordingly, HHNF’s historical financial results are reflected in the Company’s unaudited condensed consolidated financial statements as discontinued operations. The Company did not allocate any general corporate overhead or interest expense to discontinued operations.

The financial results of HHNF are presented as loss from discontinued operations, net of income taxes in the unaudited Condensed Consolidated Statements of Income. The following table presents the financial results of HHNF (dollars in millions).

	Quarterly Period Ended
	December 28, 2024			December 30, 2023
Net sales	$	204		$	520
Cost of sales		179			476
Selling, general and administrative expenses		9			29
Amortization of intangibles		4			13
Business consolidation and other activities		79			10
Operating loss		(67	)		(8	)
Interest expense		1			1
Other expense (income)		2			(3	)
Income (loss) before income taxes		(70	)		(6	)
Income tax (expense) benefit		3			—
Net income (loss) from discontinued operations		(67	)		(6	)

The Company has incurred $77 million during fiscal 2025 in separation costs related to the spin-off of HHNF, and is reported in Business consolidation and other activities. These costs are primarily related to professional fees associated with planning the spin-off, as well as spin-off activities within finance, tax, legal and information system functions and certain investment banking fees incurred upon the completion of the spin-off.

The following table summarizes the carrying value of major classes of assets and liabilities of HHNF, reclassified as assets and liabilities of discontinued operations at September 28, 2024 (dollars in millions).

	September 28, 2024
Assets
Cash and cash equivalents	$	230
Receivables, net		335
Inventories, net		260
Other current assets		60
Total current assets, discontinued operations	$	885

Property, plant and equipment, net	$	948
Goodwill and intangibles, net		1,036
Right of use asset		50
Other assets		16
Total non-current assets, discontinued operations	$	2,050

Liabilities
Accounts payable	$	296
Other current liabilities		115
Total current liabilities, discontinued operations	$	411

Deferred income taxes	$	17
Operating lease liability		39
Other non-current liabilities		89
Total non-current liabilities, discontinued operations	$	145

In connection with the spin-off, the Company entered into definitive agreements with Magnera that, among other matters, set forth the terms and conditions of the spin-off and provide a framework for Berry’s relationship with Magnera after the spin-off, including the following:

Transition Services Agreement

Pursuant to the Transition Services Agreement (TSA), Berry or one of its subsidiaries will provide various services to Magnera and its subsidiaries and Magnera or one of its subsidiaries agreed to provide various services to Berry for a limited time to help ensure an orderly transition following the spin-off. The services will terminate no later than November 4, 2026. Income from the TSA is not material to the Consolidated Statements of Income.

Tax Matters Agreement

Pursuant to the Tax Matters Agreement, Berry and Magnera allocated the liability for taxes and certain tax assets between the two companies. The Tax Matters Agreement also governs the parties’ respective rights, responsibilities, and obligations with respect to U.S. federal, state, local and foreign taxes (including taxes arising in the ordinary course of business and taxes, if any, incurred as a result of any failure of the spin-off and certain related transactions to qualify as tax-free for U.S. federal income tax purposes), tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings, and assistance and cooperation in respect of tax matters.

Pursuant to the Tax Matters Agreement, Berry is the primary obligor on all taxes which relate to any period prior to November 4, 2024.

Financing Activities

In connection with the close of the spin-off, Treasure Holdco, Inc. (Treasure), at the time a fully consolidated subsidiary of Berry, entered into $1.59 billion of new debt obligations. The debt was ultimately transferred to HHNF in connection with the spin-off and is a non-cash transaction. Cash transferred to the HHNF business related to the spin-off was $624 million.