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BWAY INTERMEDIATE COMPANY, INC. - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations

August 13, 2014

This discussion should be read in conjunction with the Annual Report and with Item 1, "Financial Statements" of this report. BWAY Intermediate is a 100% owned subsidiary of BWAY Parent. Effective November 5, 2012, BWAY Parent was acquired by certain private equity investment vehicles sponsored by Platinum. For a discussion of the "Platinum Merger," see Note 3, "Acquisition of BWAY Parent by Platinum" of Notes to Consolidated Financial Statements included in the Annual Report. The transaction resulted in a change in control, but did not affect the nature of the business, operations or customer relationships. Effective January 18, 2013, we acquired certain subsidiaries of LINPAC that comprised LINPAC's Ropak Packaging division ("Ropak"), pursuant to a definitive stock purchase agreement. See Note 4, "Business Acquisitions" of Notes to Consolidated Financial Statements included in the Annual Report for a discussion of the ("Ropak Acquisition"). In connection with the Platinum Merger and the Ropak Acquisition, the Company has embarked on an accelerated implementation program that we believe will result in meaningful cost savings with minimal incremental capital expenditures. We have implemented 550 operational initiative actions across a variety of functional areas including sales and marketing, supply chain, manufacturing and selling, general and administrative. As of June 30, 2014, we have identified an additional 800 actions representing approximately $71.0 million in annualized earnings improvement which are being implemented across a variety of functional areas including: Sales and marketing- Implement best practices, optimize customer portfolio management, centralized pricing and further expansion into large consumer accounts; Plant productivity- Implement best practices, rationalization of facilities and productivity related cost reduction focused on labor, spoilage, spending and increasing production throughput; New product initiatives- Product development, product line standardization and rationalization and continued focus on innovative/high margin products; Supply chain initiatives- Leverage scale in acquisition of raw materials including steel, resin, handles, shipping packaging, colorants and other materials, expand use of lower cost



materials;

and SG&A / back office- Further eliminate non-essential expenses and rationalize health and welfare insurance plans. As of June 30, 2014, initiatives expected to generate approximately $29.2 million of such annualized earnings improvement have been fully implemented with a further $21 million in a late stage of implementation and $21 million in an early-to-mid-stage implementation. In addition, we continue to identify additional cost saving opportunities that are in various stages of development and we expect to implement these initiatives through the remainder of this year and in 2015 and 2016. Effective February 8, 2013, we changed our fiscal year end from September 30 to December 31. We report our results of operations in two segments: metal packaging and plastic packaging. See Note 14, "Business Segments," of Notes to Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this report. Factors Affecting Our Results of Operations For a discussion of general factors affecting our results of operations, including net sales, expenses and raw materials, see "Factors Affecting Our Results of Operations" in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operation" of the Annual Report. Results of Operations In our discussion of results of operations, we discuss the mathematical difference between net sales and cost of products sold (excluding depreciation and amortization) and that difference as a percentage of net sales. We also discuss segment earnings. We define segment earnings as segment net sales less segment cost of products sold and segment-related selling expenses. Segment cost of products sold excludes segment depreciation and amortization. We exclude depreciation and amortization expense from our presentation of cost of products sold because management excludes it from operating results when evaluating segment and overall performance. Management believes the resulting measurement provides useful information to evaluate the contribution of net sales to earnings before interest, taxes, depreciation and amortization ("EBITDA"), a primary performance measure used by management. 27



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Table of Contents Three Months Ended June 30, Percent Six Months Ended June 30, Percent ($ in millions) 2014 2013 Change 2014 2013 Change Net Sales Metal packaging $ 196.6$ 189.4 3.8 % $ 373.2$ 372.5 0.2 % Plastic packaging 219.3 203.1 8.0 % 414.0 374.0 10.7 % Total $ 415.9$ 392.5 6.0 % $ 787.2$ 746.5 5.5 % Cost of products sold (1) Metal packaging $ 153.9$ 146.2 5.3 % $ 294.3$ 291.0 1.1 % Plastic packaging 190.0 174.3 9.0 % 360.4 326.8 10.3 % Segment total 343.9 320.5 7.3 % 654.7 617.8 6.0 % Corporate 0.1 0.1 - % 0.2 0.3 -33.3 % Total $ 344.0$ 320.6 7.3 % $ 654.9$ 618.1 6.0 % Net sales less cost of products sold Metal packaging $ 42.7$ 43.2 -1.2 % $ 78.9$ 81.5 -3.2 % Plastic packaging 29.3 28.8 1.7 % 53.6 47.2 13.6 % Corporate (0.1 ) (0.1 ) - % (0.2 ) (0.3 ) -33.3 % Total $ 71.9$ 71.9 - % $ 132.3$ 128.4 3.0 % Net sales less cost of products sold as a percentage of net sales Metal packaging segment 21.7 % 22.8 % 21.1 % 21.9 % Plastic packaging segment 13.4 % 14.2 % 12.9 % 12.6 % Consolidated 17.3 % 18.3 % 16.8 % 17.2 % (1) Excludes depreciation and amortization expense. Net Sales In the three and six month periods ended June 30, 2014, consolidated net sales increased $23.4 million, or 6.0%, to $415.9 million and increased $40.7 million, or 5.5%, to $787.2 million, respectively, in comparison to the same period last year. The increase is due to higher sales volume in both segments and the effective pass-through of higher raw material costs in the plastic packaging segment. Additionally, sales were higher for the six months ended June 30, 2014 due to 18 incremental days that the Company owned Ropak in 2014 compared to the same period in 2013. These increases were partially offset by a slightly unfavorable product mix shift, primarily in the metal packaging segment. In the three and six month periods ended June 30, 2014, net sales from the Company's metal packaging segment were $196.6 million and $373.2 million, respectively, compared to $189.4 million and $372.5 million, respectively, for the same periods last year. The increase in the three and six month periods ended June 30, 2014 resulted from higher sales volume driven primarily by market demand, partially offset by an unfavorable shift in sales mix. Net sales for the three months ended June 30, 2013 was also impacted by a temporary customer dislocation that was remediated by the end of June 2013. In the three and six month periods ended June 30, 2014, net sales for the Company's plastic packaging segment were $219.3 million and $414.0 million, respectively, compared to $203.1 million and $374.0 million, respectively, for the same periods last year. The increase is due to higher sales volumes as well as the effective pass-through of higher raw material costs. Additionally, sales were higher for the six months ended June 30, 2014 due to the 18 incremental days that the Company owned Ropak in 2014 compared to the same period in 2013. Difference between net sales and cost of products sold (excluding depreciation and amortization) The difference between consolidated net sales and cost of products sold (excluding depreciation and amortization) for the three and six months ended June 30, 2014, was $71.9 million and $132.3 million, respectively compared to $71.9 million and $128.4 million, respectively, for the same periods last year, and as a percentage of net sales the difference decreased to 17.3% and 16.8% for the three and six months ended June 30, 2014 compared to 18.3% and 17.2%, respectively, for the three and six 28



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months ended June 30, 2013. The percentage decrease for the three and six months ended June 30, 2014 was largely attributable to higher manufacturing costs, which include plant realignment costs in the current quarter and higher transportation and utility costs resulting from the impact of severe winter weather in the first quarter of 2014, and was partially offset by higher volumes and the benefit of operational synergies achieved as a result of our plant consolidation actions taken in 2013. The difference between metal net sales and cost of products sold (excluding depreciation and amortization) for the three and six months ended June 30, 2014 was $42.7 million and $78.9 million, respectively, compared to $43.2 million and $81.5 million, respectively, for the same periods last year. The difference between metal net sales and cost of products sold (excluding depreciation and amortization) as a percentage of net sales for the three and six months ended June 30, 2014 was 21.7% and 21.1%, respectively compared to 22.8% and 21.9%, respectively, for the three and six months ended June 30, 2013. The decrease for the three and six months ended June 30, 2014 was primarily attributable to higher manufacturing costs, which includes plant realignment costs in the current year and higher transportation and utility costs resulting from the impact of severe winter weather in the first quarter of 2014, which were partially offset by higher volumes. Also included in the three months ended June 30, 2013 was $2.6 million for a one-time impact related to a temporary customer dislocation. The difference between plastic net sales and cost of products sold (excluding depreciation and amortization) for the three and six months ended June 30, 2014, was $29.3 million and $53.6 million, respectively, compared to $28.8 million and $47.2 million, respectively, for the same periods last year. For the three months ended June 30, 2014, the increase in the gross difference includes the synergies associated with the 2013 closing of four plastic facilities and other operational synergies including supply chain initiatives and elimination of certain general and administrative costs. Improvements also resulted from actions taken by the Company to improve margins in this segment, including changes in policies and practices with regard to passing through increases in resin price and productivity improvement initiatives. These improvements were partially offset by higher freight costs to service customers and other manufacturing costs. For the six month period, the increase resulted primarily from reduced operating costs resulting from the consolidation of operations at certain legacy BWAY facilities into Ropak facilities, margin improvement actions including productivity improvement initiatives and changes to polices related to the pass-through of resin prices, and the 18 incremental days that the Company owned Ropak in 2014 as compared to the same period in 2013. The favorable impact of these factors was partially offset by costs associated with the severe winter weather in 2014 and higher freight costs to service customers and other manufacturing costs. The six months ended June 30, 2013 includes $0.8 million of non-cash charges resulting from Ropak purchase accounting inventory adjustments. The difference between net sales and the cost of products sold (excluding depreciation and amortization) as a percentage of sales was 13.4% and 12.9% for the three and six months ended June 30, 2014, respectively, compared to 14.2% and 12.6%, respectively, for the same periods last year primarily due to higher manufacturing and freight costs in relation to net sales in the current year. Selling and Administrative Expense In the three and six months ended June 30, 2014, selling and administrative expense was $6.9 million and $13.3 million, respectively, compared to $12.4 million and $21.5 million, respectively, for the same periods last year. The decrease in the current period was primarily a result of reduced professional fees related to identifying and executing business performance improvement initiatives. Depreciation and amortization expense In the three and six months ended June 30, 2014, depreciation and amortization expense decreased to $35.4 million and $70.0 million, respectively, as compared to $35.8 million and $70.3 million, respectively, for the same periods last year. Restructuring Expense In the three and six months ended June 30, 2014, restructuring expense was $1.5 million and $1.8 million, respectively, compared to $5.5 million and $7.1 million, respectively, for the same periods last year. The 2013 periods included our plastic packaging plant consolidation activities. Interest expense In the three and six months ended June 30, 2014, interest expense decreased $0.4 million and increased $0.2 million, respectively, compared to the same period last year. Interest expense decreased for the three months ended June 30, 2014 as a result of lower borrowings. On January 18, 2013, we borrowed $20.0 million on the asset based loan to finance the Ropak Acquisition which was ultimately repaid in 2013. The increase in the six months ended June 30, 2014 was primarily due to the full period impact of increased term loan borrowings related to the Ropak Acquisition. Debt principal outstanding as of June 30, 2014 and June 30, 2013 was $925.8 million and $961.6 million, respectively. Debt principal outstanding as of June 30, 2013 included outstanding revolver borrowings of $29.3 million compared to $0.8 million of outstanding revolver borrowings at June 30, 2014. 29



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Business acquisition costs In the six months ended June 30, 2013, we recorded $5.1 million of professional fees and other costs to acquire Ropak, including a success-based transaction fee of $5.0 million to PE Advisors of which $3.4 million was determined to be a business acquisition cost and $1.6 million was capitalized as debt issuance cost. Provision for (benefit from) income taxes The effective income tax rate for the three and six months ended June 30, 2014 was 38.7% and 38.3%, respectively, as compared to 78.3% and 28.3%, respectively, for the three and six months ended June 30, 2013, respectively. The effective income tax rate for the three and six months ended June 30, 2014 differed from the statutory rate primarily due to state income taxes. The effective tax rate for the three and six months ended June 30, 2013 differed from the statutory tax rate due to a foreign loss for which no benefit could be taken and estimated benefits from R&D credits. Liquidity and Capital Resources For certain risk factors that could affect our liquidity and access to capital, see our discussion of "Liquidity and Capital Resources" in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of the Annual Report. These risks remain unchanged as of June 30, 2014. As of June 30, 2014, we had $188.3 million available to borrow (subject to certain borrowing base limitations) under the ABL Facility, and we had $2.2 million of cash on hand. As of June 30, 2014, we had $0.8 million outstanding borrowings under the ABL Facility at a variable interest rate of 3.75%. We expect cash on hand, cash provided by operations and borrowings available under the ABL Facility to provide sufficient working capital to operate our business, to make expected capital expenditures and to meet foreseeable liquidity requirements, including debt service on our long-term debt, in the next 12 months. We expect to use cash provided by operations in excess of amounts needed for capital expenditures and required debt repayments to reduce debt or for other general corporate purposes. In the year ending December 31, 2014, we expect capital expenditures of approximately $55.0 million to $60.0 million, compared to $66.3 million for the fiscal year ended December 31, 2013. For the six months ended June 30, 2014 capital expenditures were $44.3 million. For a discussion of certain covenants and restrictions under our debt agreements in place as of June 30, 2014, see Note 4, "Long-Term Debt," of Notes to Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this report. As of June 30, 2014, we were in compliance with our applicable debt covenants. Debt Refinancing On August 13, 2014, BWAY Holding completed a private placement offering of $650.0 million aggregate principal amount of 9.125% Senior Notes due 2021 (the "2021 Senior Notes") and expects to enter into a $1.22 billion term loan facility (the "2014 Term Loan Facility") on August 14, 2014. The proceeds from both instruments in combination with $8.0 million from the Company's ABL Facility will be used to extinguish existing Company debt obligations, and finance a dividend to BWAY Parent for the repayment of the debt obligations of BWAY Parent and its parent, BOE Intermediate, as well as a special dividend to the stockholders of BOE Holding and certain members of management. See the "Subsequent Event" discussion in Note 1 to the condensed consolidated financial statements for additional information. The Company's current ABL Facility is expected to be amended effective August 14, 2014 to permit the payment of the dividend to BWAY Parent discussed above and to make conforming changes for the new senior notes and term loan facility; the material terms of the ABL Facility will otherwise remain unchanged.



2021 Senior Notes

The 2021 Senior Notes are priced at a discount to par of 99.364%. Interest on the notes is payable semi-annually in arrears on February 15 and August 15 of each year, with the first payment due February 15, 2015. The notes mature August 15, 2021. We will recognize original issue discount of $4.1 million as interest expense over the term of the debt on the effective yield method. The 2021 Senior Notes are general unsecured obligations of BWAY Holding and are guaranteed jointly and severally, irrevocably, fully and unconditionally by each of BWAY Holding's current and future domestic subsidiaries that is a borrower and/or guarantor under either the ABL Facility or the 2014 Term Loan Facility. BWAY Holding may redeem the notes, in whole or in part, at any time on or after August 15, 2017 at certain redemption prices specified in the indenture, plus accrued and unpaid interest, if any, to the redemption date. It may also redeem some or all of the notes before August 15, 2017 at the price of 100% of the principal amount of the notes being redeemed plus accrued and unpaid 30



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interest, if any, to the redemption date plus a "make-whole" premium as set forth in the indenture. In addition, at any time before August 15, 2017BWAY Holding may redeem up to 40% of the aggregate principal amount of the notes, using the net cash proceeds from certain equity offerings. Any time after February 15, 2015 and prior to February 15, 2016, in connection with (but not prior to) the consummation of a transaction that constitutes a change of control, BWAY Holding or any acquirer may redeem all of the notes at a redemption price equal to 103% of the principal amount of the notes redeemed, plus accrued and unpaid interest to the date of redemption, subject to certain conditions. The indenture governing the notes contains covenants that limit the ability of BWAY Holding (and most of its subsidiaries) to, among other things: (i) incur additional indebtedness or issue certain preferred stock; (ii) pay dividends, redeem stock or make other distributions; (iii) make other restricted payments or investments; (iv) create liens on assets; (v) transfer or sell assets; (vi) create restrictions on payment of dividends or other amounts by BWAY Holding to its restricted subsidiaries; (vii) engage in mergers or consolidations; (viii) engage in certain transactions with affiliates; and (ix) designate its subsidiaries as unrestricted subsidiaries.



2014 Term Loan Credit Facility

We expect to enter into the 2014 Term Loan Facility pursuant to a term loan credit agreement, dated as of August 14, 2014, by and among BWAY Intermediate, BWAY Holding, as lead borrower, BWAY Corporation and North America Packaging Corporation, as subsidiary borrowers, the lenders party thereto and Bank of America, N.A., as administrative agent. The 2014 Term Loan Facility will mature on August 14, 2020. We will recognize original issue discount of $12.2 million as interest expense over the term of the debt using the effective yield method. The 2014 Term Loan Facility will amortize in equal quarterly installments in an amount equal to 1.00% per annum of the original principal amount thereof, with the remaining balance due at final maturity. Interest is payable on the new term loan credit facility at a rate equal to the LIBO rate or the base rate, plus an applicable margin. The 2014 Term Loan Facility is guaranteed by BWAY Intermediate and each of the BWAY Holding's current and future direct and indirect wholly-owned subsidiaries (the "Term Loan Guarantors") other than (i) unrestricted subsidiaries, (ii) certain immaterial subsidiaries, (iii) foreign subsidiaries and any domestic subsidiary of a foreign subsidiary, (iv) certain holding companies of foreign subsidiaries, (v) not-for-profit subsidiaries, (vi) any subsidiary that is prohibited by applicable law or contractual obligation from guaranteeing the 2014 Term Loan Facility or which would require governmental approval to provide a guarantee (unless such approval has been received), and (vii) Armstrong Containers, Inc. The 2014 Term Loan Facility is expected to be secured by a first priority security interest (subject to permitted liens and certain other exceptions) on substantially all of the Company's fixed assets and secured by a second priority lien on all current assets (second in priority to the liens securing the ABL Facility). We may repay all or any portion of the outstanding 2014 Term Loan Facility at any time, subject to (i) redeployment costs in the case of prepayment of LIBO borrowings other than the last day of the relevant interest period and (ii) a 1.00% prepayment premium on any prepaid term loans in the first twelve months after the closing date in connection with a repricing transaction. Subject to certain exceptions and reinvestment rights, the 2014 Term Loan Facility will require that 100% of the net cash proceeds from certain asset sales, insurance recovery and condemnation events and debt issuances and 50% (subject to step-downs based on first lien net leverage ratio) from excess cash flow for each fiscal year (commencing with the fiscal year ending December 31, 2014) must be used to pay down outstanding borrowings under the 2014 Term Loan Facility. The 2014 Term Loan Facility will contain certain negative covenants (subject to exceptions, materiality thresholds and baskets) including, without limitation, negative covenants that limit BWAY Holding's and its restricted subsidiaries' ability to incur additional debt, guarantee other obligations, grant liens on assets, make loans, acquisitions or other investments, dispose of assets, make optional payments or modify certain debt instruments, pay dividends or other payments on capital stock, engage in mergers or consolidations, enter into arrangements that restrict BWAY Holding's and its restricted subsidiaries' ability to pay dividends or grant liens, engage in transactions with affiliates, or change fiscal year. The 2014 Term Loan Facility will contain events of default, including, without limitation (subject to customary grace periods and materiality thresholds) events of default upon (i) the failure to make payments under the credit facility, (ii) violation of covenants, (iii) incorrectness of representations and warranties, (iv) cross default and cross acceleration to other material indebtedness in excess of an amount to be agreed, (v) bankruptcy events, (vi) material monetary judgments in an amount in excess of an amount to be agreed (to the extent not covered by insurance), (vii) certain matters arising under ERISA that could reasonably be expected to result in a material adverse effect, (viii) the actual or asserted invalidity of any material guarantees or non- perfection of security 31



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interests and (ix) the occurrence of certain changes of control. Upon the occurrence of certain events of default, the obligations under the 2014 Term Loan Facility may be accelerated.

Cash Flow Information Summary of cash flows and changes in cash and cash equivalents for the six months ended June 30, 2014 and June 30, 2013:

Six Months Ended June 30, Percent ($ in millions) 2014 2013 Change Cash provided by operating activities $ 25.4$ 46.4 -45.3 % Cash used in investing activities (44.1 ) (296.8 ) -85.1 % Cash (used in) provided by financing activities (19.4 ) 256.3 NM Effect of exchange rate changes - 0.1 -100.0 % Net (decrease) increase in cash and cash equivalents $ (38.1 )$ 6.0 NM



Cash and cash equivalents, end of period $ 2.2$ 8.2 -73.2 %

NM-Not meaningful Operating Activities In the first six months of 2014, cash provided by operating activities decreased $21.0 million as compared to the same period last year. The decrease is primarily related to an increase in cash used for primary working capital. We define primary working capital as the sum of accounts receivable and inventories less accounts payable. Cash used for primary working capital was $51.3 million for the six months ended June 30, 2014 compared to cash used in primary working capital of $23.6 million in the six months ended June 30, 2013. The increase in cash used for primary working capital is primarily due to changes in the timing of collections on accounts receivable and higher inventories. Investing Activities For the six months ended June 30, 2014, cash used in investing activities decreased $252.7 million as compared to the same period last year. In the six months ended June 30, 2013, we used $268.0 million of cash to acquire the equity of Ropak. Capital expenditures increased by $12.6 million in the six months ended June 30, 2014 compared to the prior period. Financing Activities For the six months ended June 30, 2014, cash used in financing activities was $19.4 million compared to cash provided by financing activities of $256.3 million for the six months ended June 30, 2013. The change is primarily due to the issuance of debt in connection with the Ropak Acquisition in January 2013. In the six months ended June 30, 2014, cash used in financing activities included $3.7 million of principal repayments on the 2012 Term Loan, $0.6 million of capital lease payments, $0.8 million of net borrowings on revolving credit facilities, and $15.9 million in dividend payments to BWAY Parent. For the six months ended June 30, 2013, cash provided by financing activities included $261.0 million of additional borrowings under the 2012 Term Loan to finance, in part, the January 2013 Ropak Acquisition and net revolver borrowings of $25.7 million, partially offset by the payment of $9.1 million of debt issuance cost associated with the new debt, and the payment of $17.1 million of dividends to BWAY Parent. Market Risk We have certain variable rate debt that exposes our cash flows and earnings to the market risk of interest rate changes. The 2012 Senior Secured Credit Facilities bear interest at an applicable margin (based on certain ratios contained in the credit agreement) plus a market rate of interest. As of June 30, 2014, we had variable rate borrowings of $720.8 million exposed to interest rate risk. Each 100 basis point increase in interest rates relative to these borrowings would reduce quarterly income before income taxes by $1.8 million. Our reporting currency is the U.S. dollar. Fluctuations in the Canadian dollar relative to the U.S. dollar can affect our reported financial position, results of operations and cash flows. In the six month period ended June 30, 2014 and June 30, 2013, approximately 9.0% and 11.0%, respectively, of net sales were to customers located in Canada. Excluding purchases denominated in Canadian dollars, which are generally funded through our Canadian operations, other purchases denominated in 32



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foreign currencies were not significant. We do not believe exchange rate changes related to such purchases expose us to material foreign currency exchange rate risk. Critical Accounting Policies For a summary of our critical accounting policies, see "Critical Accounting Policies" in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of the Annual Report. Our critical accounting policies have not changed from those summarized in the Annual Report. Off-Balance Sheet Arrangements As of June 30, 2014, a bank had issued standby letters of credit on our behalf in the aggregate amount of $10.9 million, primarily in favor of our workers' compensation insurers. Also, as discussed in Notes 1 and 4 of the condensed consolidated financial statements, BWAY Parent and BOE Intermediate have indebtedness of $335.0 million (senior PIK toggle notes due 2017) and $285.0 million (BOE PIK Notes due 2017), respectively. Because neither of these instruments are secured by our assets, nor are we guarantors to either instrument, they are not included in our condensed consolidated financial statements. Contractual Obligations As of June 30, 2014, the nature of our contractual obligations has not materially changed for the disclosure in the Annual Report. See "Contractual Obligations and Commercial Commitments" in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," of the Annual Report. See Subsequent Event in Note 1 to the condensed consolidated financial statements for a discussion of our August 13, 2014 debt refinancing transaction. Commodity Risk We are subject to various risks and uncertainties related to changing commodity prices for, and the availability of, the raw materials (primarily steel and plastic resin) and energy (primary electricity and natural gas) used in our manufacturing processes. Environmental Matters For a discussion of contingencies related to environmental matters, see Note 13, "Commitments and Contingencies," of Notes to Unaudited Condensed Consolidated Financial Statements, included in Part I, Item I of this report. 33



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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS This report contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. You should not place undue reliance on these statements. Forward-looking statements include information concerning our liquidity and our possible or assumed future results of operations, including descriptions of business strategies. These statements often include words such as "believe," "expect," "anticipate," "intend," "plan," "estimate," "seek," "will," "may" or similar expressions. These statements are based on certain assumptions that we have made in light of our experience in the industry as well as our perceptions of historical trends, current conditions, expected future developments, expected business synergies related to acquisitions, and other factors we believe are appropriate in these circumstances. As you read and consider this report, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties and assumptions. Many factors could affect our actual financial results and could cause actual results to differ materially from those expressed in the forward-looking statements. Some important factors include: competitive risks from other container manufacturers or self-manufacture by customers; termination of our customer contracts; loss or reduction of business from key customers; dependence on key personnel; increases in steel, resin or other raw material and energy costs or availability, which cost increases may not coincide with our ability to timely or fully recoup such increases; product liability or product recall costs; lead pigment and lead paint litigation; increased consolidation in our end-markets; consolidation of key suppliers; decreased sales volume in our end-markets; increased use of alternative packaging; product substitution; labor unrest; environmental, health and safety costs; management's inability to evaluate and selectively pursue acquisitions; operational improvement plans may not be achieved; fluctuation of our quarterly operating results; current economic conditions; the availability and cost of financing; an increase in interest rates; restrictions in our debt agreements; fluctuations of the Canadian dollar; cost and difficulties related to the acquisition of a business and integration of acquired businesses; the impact of any potential dispositions, acquisitions or other strategic realignments, which may impact the Company's operations, financial profile, investments, or level of indebtedness; goodwill impairment; and other factors disclosed in this report. In light of these risks, uncertainties and assumptions, the forward-looking statements contained in this report might not prove to be accurate and you should not place undue reliance upon them. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements. All such statements speak only as of the date made, and we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. 34



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