Magnera Corp

Notes to Consolidated Financial Statements

(tables in millions of dollars, except per share data)

1. Basis of Presentation

On November 4, 2024 (the “Closing Date”), Treasure Holdco, Inc. (“Treasure”), which was a wholly owned subsidiary of Berry Global Group, Inc. (“Berry”), completed its merger (the “Transaction”) with the Glatfelter Corporation (“GLT”) which concurrently changed its name to Magnera Corporation (the “Company,” “we,” or “Magnera”). As a result, pre-Transaction Treasure shareholders received shares of Magnera representing 90% of the combined company and GLT shareholders retained 10%. As Treasure was identified as the accounting acquirer, the prior year presentation represents standalone Treasure results with the acquisition method of accounting being applied to the assets acquired and liabilities assumed of GLT. See Note 3—Acquisition.

The accompanying unaudited Consolidated and Combined Financial Statements of Magnera Corporation have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") for interim reporting. In preparing financial statements in conformity with GAAP, we must make estimates and assumptions that affect the reported amounts and disclosures at the date of the financial statements and during the reporting period. Actual results could differ from those estimates. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included, and all subsequent events up to the time of the filing have been evaluated. For further information, refer to the Company’s Form 8-K/A filed on January 31, 2025 with the SEC.

The pre-Transaction combined financial results of operations, financial position, and cash flows have been prepared on a carve-out basis, which include assumptions underlying the preparation that management believe are reasonable. However, the combined pre-Transaction financial information included herein may not necessarily reflect the Company’s results of operations, financial position, and cash flows had the Company been an independent stand-alone company during the periods presented.

For periods prior to the Closing Date, transactions between Berry and Treasure were reflected as a component of Berry's net investment in the Consolidated and Combined Balance Sheets and as a financing activity within the accompanying Consolidated and Combined Statements of Cash Flows. Berry's net investment on the Consolidated and Combined Balance Sheet and Consolidated and Combined Statement of Stockholders’ Equity represents the cumulative net investment by Berry in Treasure. Concurrent with the closing of the Transaction, Berry received a cash distribution and, in turn, transferred Berry’s health, hygiene and specialties global nonwovens and films business to Treasure. As a result, Berry's net investment in Treasure was reduced tozero with a corresponding adjustment to Additional Paid-in Capital.

Recently Issued Accounting Pronouncements

In 2023, the Financial Accounting Standards Board ("FASB") issued guidance with the goal of providing more information about reportable segments, including disaggregated expense information. The Company adopted all required disclosures requirements in fiscal 2025.

In 2023, the FASB issued guidance with the goal of providing more information in the income tax reconciliation table and regarding income taxes paid. The Company is currently evaluating the impact of adopting this guidance.

In 2024, the FASB issued guidance with the goal of providing more expense information of certain categories of expenses that are included in line items on the face of the statements of earnings. The Company is currently evaluating the impact of adopting this guidance.

2. Revenue and Accounts Receivable

Revenue is recognized when performance obligations are satisfied, in an amount reflecting the consideration to which the Company expects to be entitled. We consider the promise to transfer products to be our sole performance obligation. Generally, our revenue is recognized for standard promised goods at the time of shipment, when title and risk of loss pass to the customer. The Company disaggregates revenue based on geography. See Note 9—Segment and Geographic Data.

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The Company records current expected credit losses based on a variety of factors including historical loss experience and current customer financial condition. The changes to our current expected credit losses, write-off activity, and recoveries were not material for any of the periods presented.

The Company has entered into various factoring agreements, primarily customer-based supply chain financing programs, to sell certain receivables to third-party financial institutions. These agreements result in true sales of the transferred receivables, which occur when receivables are transferred without recourse to the Company, are reflected as a reduction of trade receivables, net on the consolidated and combined balance sheets and the proceeds are included in the cash flows from operating activities in the consolidated and combined statements of cash flows.

3. Acquisition

Glatfelter

The Transaction combined GLT’s sustainable solutions and product portfolio with Treasure’s proprietary technologies and global scale. The Company is now a global leader in growing markets while serving some of the world’s largest brand owners. The results of GLT have been included in the consolidated results of the Company since the Closing Date.

The GLT acquisition has been accounted for under the purchase method of accounting. Under this method, the assets acquired and liabilities assumed have been recorded based on estimated fair values as of the Closing Date. Certain assets, including inventory, intangibles, and property, plant, and equipment included in the purchase price allocation have been estimated based on historical acquisitions. The Company will have a full valuation analysis performed over the acquired business during subsequent quarters and will continue to update the purchase price allocation throughout the year. The Company has recognized goodwill on this Transaction primarily as a result of expected cost synergies, and expects goodwill not to be deductible for tax purposes.

The following table summarizes the purchase price allocation, which is preliminary and subject to change within one year of the Closing Date:

(a) Includes a $12 million step up of inventory to fair value

When including GLT results for the periods prior to the Closing Date, unaudited pro forma net sales and net loss were $885 million and $25 million, respectively for the quarterly period ended March 30, 2024, $1,638 million and $110 million, respectively, for the two quarterly periods ended March 29, 2025, and $1,725 million and $60 million, respectively, for the two quarterly periods ended March 30, 2024. The unaudited pro forma net sales and net income figures assume that the Transaction was consummated as of the beginning of the relevant period.

4. Transaction and Other Activities

The table below sets forth the significant components of the Transaction and other activities, including supply chain financings activity charges recognized for the periods presented, by reportable segment:

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The table below sets forth the activity with respect to the transaction and other activities accrual at March 29, 2025:

(a) Restructuring activities

(b) Includes $19 million of Transaction related compensation

5. Leases

The Company leases certain manufacturing facilities, warehouses, office space, manufacturing equipment, office equipment, and automobiles.

Supplemental lease information is as follows:

6. Long-Term Debt

Long-term debt consists of the following:

As part of the Transaction, the Company consummated a $785 million Term Loan due 2031 (the “Term Loan”), an $800 million issuance of 7.25% First Priority Senior Secured Notes due 2031 (the “7.25% Notes”), and a $350 million revolving credit facility (the “Revolving Credit Facility”). The proceeds from the Term Loan and 7.25% Notes were used to retire a portion of GLT outstanding debt and fund a cash distribution to Berry.

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Despite not having financial maintenance covenants on our Term Loan and secured notes, these agreements do contain certain negative covenants. The failure to comply with these negative covenants could restrict our ability to incur additional indebtedness, effect acquisitions, enter into certain significant business combinations, make distributions or redeem indebtedness. The current portion of long-term debt consists of quarterly principal payments on the term loan due within one year. We are in compliance with all covenants as of March 29, 2025.

Debt discounts, deferred financing fees and the purchase price adjustment related to the retained GLT 4.75% First Priority Senior Secured Notes are presented net of Long-term debt, less the current portion on the Consolidated and Combined Balance Sheets and are amortized to Interest expense on the Consolidated and Combined Statements of Operations through maturity.

7. Financial Instruments and Fair Value Measurements

In the normal course of business, the Company is exposed to certain risks arising from business operations and economic factors. The Company may use derivative financial instruments to help manage market risk and reduce the exposure to fluctuations in foreign currencies. These financial instruments are not used for trading or other speculative purposes.

Cross-Currency Swaps

The Company is party to certain cross-currency swaps to hedge a portion of our foreign currency risk. During the quarter ended March 29, 2025, the Company received net proceeds of $22 million related to the settlement of existing cross-currency rate swaps, with the offset being recorded in Accumulated other comprehensive loss. Following the settlement, the Company entered into a €250 million and a €425 million cross-currency swap, maturing November 2027 and November 2029 respectively. The swaps are designated as a hedge of the Company’s foreign currency investment in foreign subsidiaries.

The Company records the fair value positions of all derivative financial instruments on a net basis by counterparty for which a master netting arrangement is utilized. Balances on a gross basis are as follows:

The effect of the Company’s derivative instruments on the Consolidated and Combined Statements of Operations is as follows:

Non-recurring Fair Value Measurements

The Company has certain assets that are measured at fair value on a non-recurring basis when impairment indicators are present or when the Company completes an acquisition. The Company adjusts certain long-lived assets to fair value only when the carrying values exceed the fair values. The categorization of the framework used to value the assets is considered Level 3, due to the subjective nature of the unobservable inputs used to determine the fair value. These assets that are subject to our impairment analysis primarily include our definite lived and indefinite lived intangible assets, including Goodwill and our Property, plant and equipment. The Company reviews Goodwill and other indefinite lived assets for impairment as of the first day of the fourth fiscal quarter each year and more frequently if impairment indicators exist. As a result of the fiscal 2024 assessment, the Company recorded an impairment charge of $172 million. No impairment indicators were identified in the current quarter.

Included in the following tables are the major categories of assets and their current carrying values, along with the impairment loss recognized on the fair value measurement for the period then ended:

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The Company’s financial instruments consist primarily of cash and cash equivalents, long-term debt, cross-currency swap agreements, and finance lease obligations. The book value of our marketable long-term indebtedness exceeded fair value by $77 million as of March 29, 2025. The Company’s long-term debt fair values were determined using Level 2 inputs (substantially observable).

8. Income Taxes

The YTD effective income tax rate was unfavorably impacted by the jurisdictional mix of pre-tax results among the Company and its subsidiaries and losses, which generate no tax benefit in domestic and certain foreign jurisdictions.

9. Segment and Geographic Data

The Company’s operations are organized intotwo operating and reportable segments: Americas and Rest of World. The structure is designed to align us with our customers, provide improved service, drive future growth, and to facilitate synergy realization.

Selected information by reportable segment is presented in the following tables:

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Selected information by geographical region is presented in the following table:

Selected information by category is presented in the following tables:

10. Contingencies and Commitments

Litigation

The Company is party to various legal proceedings involving routine claims which are incidental to its business. Although the Company’s 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 its consolidated and combined financial position, results of operations or cash flows.

Environmental Claims

Over the next 30 years, we are primarily responsible for the reimbursement of government oversight costs associated with certain environmental claims regarding the Fox River located in Neenah, Wisconsin. At March 29, 2025, the outstanding balance of the environmental liability and corresponding escrow asset was $14 million and $9 million, respectively.

Tax Claims

As part of a previous acquisition, the Company acquired a liability related to certain tax claims treated as a deferred purchase price (the “Deferred Consideration”). The Deferred Consideration accretes at a rate of 9.5% per annum compounded daily, which shall be paid to the selling stockholders of the previous acquisition to the extent certain existing and potential tax claims are resolved. At March 29, 2025 and March 30, 2024, the outstanding balance of the Deferred Consideration was $53 million and $55 million, respectively. If the Company incurs actual tax liability with respect to the tax claims, the amount of the Deferred Consideration owed to the selling stockholders will be reduced by the amount of such actual tax liability. The Company will be responsible for any actual tax liability in excess of the Deferred Consideration. The Deferred Consideration is reflected on the consolidated and combined balance sheets in Other long-term liabilities as the settlement of existing and potential claims is expected to be greater than one year.

11. Basic and Diluted Net Income (Loss) Per Share

Basic net income or earnings per share ("EPS") is calculated by dividing the net income attributable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration for common stock equivalents.

The following tables provide a reconciliation of the numerator and denominator of the basic and diluted EPS calculations:

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While there were no shares outstanding in prior periods, an allocation of 90% of the shares as of the completion of the Transaction have been provided for comparability purposes. Shares excluded from the current period calculation, as the effect of their conversion into shares of our common stock would be antidilutive were 1.1 million.

12. Corporate Expense Allocation

Based on management estimates, $3 million and $9 million of general corporate expenses including information technology, accounting, legal, human resources, and other services were allocated to Treasure periods prior to the Closing Date during the six months ended March 29, 2025 and March 30, 2024, respectively.

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