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Item
1.
BUSINESS
(In millions of dollars, except as otherwise noted)
Introductory Note
On November 4, 2024, Treasure Holdco, Inc., which was a wholly owned subsidiary of Berry Global Group, Inc. (“Berry”), Berry, Magnera Corporation, a
Pennsylvania corporation (formerly known as Glatfelter Corporation, “Magnera”), and certain wholly owned subsidiaries of Magnera, completed the previously disclosed spinoff and merger transactions contemplated by that certain RMT Transaction Agreement,
dated as of February 6, 2024, by and among Berry, Magnera, Treasure Holdco, Inc. and certain wholly owned subsidiaries of Magnera (the “RMT Transaction Agreement”) and certain other agreements in connection with the transactions contemplated by the RMT
Transaction Agreement (the “Transactions”). As a result of a series of mergers in connection with the Transactions, the separate corporate existence of Treasure Holdco, Inc. ceased and Treasure Merger Sub II, LLC became its successor by merger. Unless
otherwise indicated or the context otherwise requires, the “registrant” and the “Company” refer to Treasure Holdco, Inc. prior to the Transactions and Treasure Merger Sub II, LLC following the Transactions. Unless otherwise provided or the context
otherwise requires, the information provided herein is provided as of the Company’s fiscal year end on September 28, 2024 and accordingly does not give effect to the Transactions.
General
The Company is a leading global supplier of a broad range of innovative non-woven and related products that service global markets. We sell our products
predominantly into stable, consumer-oriented end markets, such as healthcare, personal care, and infection prevention. Our customers consist of a mix of leading global, national, and mid-sized regional businesses. For the fiscal year ended September 28, 2024 (“fiscal 2024”), our top
customer represented approximately 12% of net sales and our top ten customers represented approximately 43% of net sales. We believe our manufacturing processes, manufacturing footprint, and ability to leverage our scale to reduce costs, position us
as a low-cost manufacturer relative to our competitors.
Additional financial information about our segments is provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and
the “Notes to Combined Financial Statements,” which are included elsewhere in this report.
Segment Overview
The Company’s operations are organized into two reporting segments: Americas and Rest of World. The structure is designed to align us with our customers,
optimize costs, provide quality service, and drive future growth.
The Americas segment is the Company's largest segment, accounting for 68% of consolidated net sales. Our Americas operations consist of 17 manufacturing
facilities - 9 in the United States, 3 in Brazil, 2 in Mexico and 1 each in Canada, Columbia, and Argentina. The segment primarily manufactures a wide range of products and components of personal care and consumer solution products and components of
products including medical garments, wipes, dryer sheets, face masks, filtration, baby diapers and adult incontinence.
The Rest of World segment represents 32% of our consolidated net sales. Our Rest of World operations consist of 13 manufacturing facilities - 3 in Germany, 3 in
France, 2 in United Kingdom, 2 in China, and 1 each in Spain, Italy, and Netherlands. This segment primarily manufactures a broad collection of personal care and consumer solution products and components of products including medical garments, wipes,
face masks, corrosion protection, cable wrap, filtration, baby diapers and adult incontinence.
Marketing, Sales, and Competition
We reach our customer base through a direct sales force of dedicated professionals. Our scale enables us to dedicate certain sales and marketing efforts to
particular customers, when applicable, which enables us to develop expertise that we believe is valued by our customers.
The major markets in which the Company sells its products are highly competitive. Areas of competition include service, innovation, quality, and price. This
competition is significant as to both the size and the number of competing firms. Competitors include but are not limited to Ahlstrom, Avgol, Freudenberg, and Fitesa.
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Raw Materials
Our primary raw material is polymer resin. In addition, we use other materials such as fiber, paper and packaging materials in various manufacturing
processes. While temporary industry-wide shortages of raw materials have occurred, we have historically been able to manage the supply chain disruption by working closely with our suppliers and customers. Changes in the price of raw materials are
generally passed on to customers through contractual price mechanisms over time, during contract renewals and other means.
Patents, Trademarks and Other Intellectual Property
We customarily seek patent and trademark protection for our products and brands while seeking to protect our proprietary know-how. While important to our
business in the aggregate, sales of any one individually patented product is not considered material to any specific segment or our consolidated results.
Environmental and Sustainability
Sustainability is comprehensively embedded across our business, from how we run our manufacturing operations more efficiently to the investments we are making
in sustainable solutions. With our global scale, deep industry experience, and strong capabilities, we are uniquely positioned to assist our customers in the design and
development of sustainable solutions.
We also work globally on continuous improvement of employee safety, energy usage, water efficiency, waste reduction, recycling and reducing our Green house
Gas (GHG) emissions. Our teams focus on improving the circularity and reducing the carbon footprint of our products. We anticipate higher demand for products with lower emissions intensity where polymer resin based products are inherently well
positioned since they typically have lower GHG emissions per functional unit compared to heavier alternatives. Additionally, there is also significant work being done on the use of recycled and bio-based content, which typically has lower associated
GHG emissions compared to other virgin materials.
Human Capital and Employees
Health and Safety
Safety for our approximately 6,000 employees is our number one core value. We
believe when it comes to employee safety, our best should always be our standard. It is through the adherence to our global Environment, Health, and Safety principles we have been able to identify and mitigate operational risks and drive continuous
improvement.
Talent and Development
We seek to attract, develop and retain talent throughout the company. Our succession management strategy focuses on a structured succession framework and
multiple years of performance. Our holistic approach to developing key managers and identifying future leaders includes challenging assignments, formal development plans and professional coaching.
Employee Engagement
We seek to ensure that our employees are motivated to perform every day. To further that objective, our engagement approach focuses on clear communication and
recognition. We communicate through regular employee meetings with business and market updates and information on production, safety, quality and other operating metrics. We have many recognition-oriented awards and conduct company-wide engagement
surveys which have generally indicated high levels of engagement and trust in leadership.
Inclusion
We strive to build a safe and inclusive culture where employees feel valued and treated with respect. We believe inclusion helps drive engagement, innovation
and organizational growth. Our focus to date has been on providing training for our global workforce and increasing awareness about the importance of having a culture of inclusion.
Ethics
Our employees are expected to act with integrity and we maintain a Global Code of Business Ethics which is attested by every employee and provides the
Company's framework for ethical business.
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Item 1A.
RISK FACTORS
Operational Risks
Global economic conditions, including inflation and supply chain disruptions, may negatively impact our business operations and financial
results.
Challenging current and future global economic conditions, including inflation and supply chain disruptions may negatively impact our business operations and
financial results. Recent regional and global conflicts have increased volatility in world economies. Current global economic challenges,
including relatively high inflation and supply chain constraints may continue to put pressure on our business.
When challenging economic conditions exist, our customers may delay, decrease or cancel purchases from us, and may also delay payment or fail to pay us
altogether. Suppliers may have difficulty filling our orders and distributors may have difficulty getting our products to customers, which may affect our ability to meet customer demands, and result in a loss of business. Weakened global economic
conditions may also result in unfavorable changes in our product prices, product mix and profit margins. Although we take measures to mitigate the impact of inflation, including through pricing actions and productivity programs, if these actions are
not effective our cash flow, financial condition, and results of operations could be adversely impacted. In addition, there could be a time lag between recognizing the benefit of our mitigating actions and when the inflation occurs and there is no
assurance that our mitigating measures will be able to fully mitigate the impact of inflation.
Political volatility may also contribute to the general economic conditions and
regulatory uncertainty in regions in which we operate. Future unrest and changing policies could result in an adverse impact to our financial condition. Political developments can also disrupt the markets we serve and the tax jurisdictions in which
we operate and may affect our business, financial condition and results of operations.
Raw material inflation or shortage of available materials could harm our financial condition and results of operations.
Raw materials are subject to price fluctuations and availability, due to external
factors, such as recent regional and global conflict, weather-related events, or other supply chain challenges, which are beyond our control. Temporary industry-wide shortages of raw materials have occurred in the past, which can lead to increased
raw material price volatility. Additionally, our suppliers could experience cost increases to produce raw material due to increases in carbon pricing. Historically we have been able to manage the impact of higher costs by increasing our selling
prices. We have generally been well positioned to capture additional market share as our primarily raw material, polymer resin, is typically a lower cost and more versatile substrate compared to alternatives. However, raw material shortages or our
inability to timely pass-through increased costs to our customers may adversely affect our business, financial condition and results of operations.
Weather related events could negatively impact our results of operations.
Weather related events could adversely impact our business and the business of our customers, suppliers, and partners. Such events may have a physical impact
on our facilities, inventory, suppliers, and equipment and any unplanned downtime at any of our facilities could result in unabsorbed costs that could negatively impact our results of operations for the period in which it experienced the downtime.
Longer-term climate change patterns could alter future customer demand, impact supply chains and increase operating costs. However, any such changes are uncertain and we cannot predict the net impact from such events.
We may not be able to compete successfully and our customers may not continue to purchase our products.
We compete with multiple companies in each of our product lines on the basis of a number of considerations, including price, service, quality, product
characteristics and the ability to supply products to customers in a timely manner. Additionally, consumer views on environmental considerations could potentially impact demand for our products that utilize fossil fuel based materials in their
manufacturing. Our competitors may have financial and other resources that are substantially greater than ours and may be better able than us to withstand higher costs. Competition and product preference changes could result in our products losing
market share or our having to reduce our prices, either of which could have a material adverse effect on our business, financial condition and results of operations. In addition, since we do not have long-term arrangements with many of our customers,
these competitive factors could cause our customers to shift suppliers quickly.
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We may pursue and execute acquisitions or divestitures, which could adversely affect our business.
As part of our growth strategy, we consider transactions that either complement or expand our existing business and create economic value. Transactions involve
special risks, including the potential assumption of unanticipated liabilities and contingencies as well as difficulties in integrating acquired businesses or carving-out divested businesses, which may result in substantial costs, delays or other
problems that could adversely affect our business, financial condition and results of operations. Furthermore, we may not realize all of the synergies we expect to achieve from our current strategic initiatives due to a variety of risks. If we are
unable to achieve the benefits that we expect to achieve from our strategic initiatives, it could adversely affect our business, financial condition and results of operations.
In the event of a catastrophic loss of one of our key manufacturing facilities, our business would be adversely affected.
While we maintain insurance covering our facilities, including business interruption insurance, a catastrophic loss of the use of all or a portion of one of our
key manufacturing facilities due to accident, labor issues, weather conditions, natural disaster, pandemic or otherwise, whether short or long-term, could result in future losses.
Employee retention or labor cost inflation could disrupt our business.
Our relations with employees under collective bargaining agreements remain satisfactory and there have been no significant work stoppages or other labor
disputes during the past four years. However, we may not be able to maintain constructive relationships with labor unions or trade councils and may not be able to successfully negotiate new collective bargaining agreements on satisfactory terms in
the future.
Labor is subject to cost inflation, availability and workforce participation rates, all of which could be impacted by factors beyond our control. As a
result, there can be no assurance we will be able to recruit, train, assimilate, motivate and retain employees in the future. The loss of a substantial number of these employees or a prolonged labor dispute could disrupt our business and result in
future losses.