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Date of report (Date of earliest event reported): February 7, 2018

BERRY GLOBAL GROUP, INC.

(Exact name of registrant as specified in charter)

101 Oakley Street

Evansville, Indiana 47710

 (Address of principal executive offices / Zip Code)

 

(812) 424-2904

(Registrant's telephone number, including area code)

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

On February 7, 2018, Berry Global Group, Inc. ("Berry") issued a press release regarding its financial results for the quarter ended December 30, 2017.  Berry's press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and incorporated by reference herein.

The information in this Item 2.02 of this Current Report on Form 8-K and the Exhibits hereto shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.

 

 

 

SIGNATURES

 

Berry Global Group, Inc. Reports First Quarter Fiscal 2018 Results

EVANSVILLE, Ind. – February 7, 2018 – Berry Global Group, Inc. (NYSE:BERY) today reported results for its first fiscal 2018 quarter, referred to in the following as the December 2017 quarter.

 

Highlights
●	Net income was $163 million.
●	Net income per diluted share increased to $1.20 compared to $0.40 in the prior year quarter.
●	Adjusted net income per diluted share up 34 percent to $0.67.
●	Net sales increased 18 percent to $1.8 billion.
●	Operating income increased by 12 percent to $163 million.
●	Operating EBITDA was $310 million (17.5 percent of net sales), an increase of 12 percent.
●	Cash flow from operations increased by 7% to $153 million.
●	Increased guidance for fiscal year 2018 cash flow from operations to $1,007 million and adjusted free cash flow to $630 million.

"I am proud to report we had another solid quarter of improved financial results.  Milestones for both revenue and operating EBITDA were achieved for any December ended quarter.  I am very proud of our employees who continually focus on building and strengthening our competitive advantages while providing high quality products and service to our customers," said Tom Salmon, Chairman and Chief Executive Officer of Berry.

The net sales increase of $274 million from the prior year quarter is primarily attributed to acquisition net sales of $267 million, an $18 million favorable impact from currency translation, and increases in selling prices due to the pass through of higher resin prices.  These increases are partially offset by a 1% base volume decline.

The operating income increase of $17 million from the prior year quarter is primarily attributed to acquisition operating income of $26 million, and an $11 million decrease in selling, general, and administrative expenses from cost reductions, and a $7 million decrease in depreciation and amortization. These increases are partially offset by an $18 million unfavorable impact from under recovery of higher cost of goods sold, a $5 million increase in business integration and restructuring costs, and a $4 million unfavorable impact from volume decline.

The performance of the Company's divisions compared with the prior fiscal year quarter is as follows:

Engineered Materials' net sales increased by $265 million from the prior year quarter primarily attributed to acquisition net sales of $267 million and a $6 million increase in selling prices due to the pass through of higher resin prices, partially offset by a 2% base volume decline.

 

The operating income increase of $35 million from the prior year quarter is primarily attributed to acquisition operating income of $26 million, a $4 million favorable improvement in price cost spread, and a $4 million decrease in depreciation and amortization expense.

Health, Hygiene, and Specialties' net sales increased by $7 million from the prior year quarter primarily attributed to a $16 million favorable impact from currency translation, partially offset by a 1% base volume decline. 

 

The operating income decrease of $22 million from the prior year quarter is primarily attributed to a $17 million negative impact from under recovery of cost of goods sold related to inflation and market pressure in South America, a $6 million increase in business integration and restructuring costs, and a slight increase in depreciation and amortization expense, partially offset by a $4 million decrease in selling, general and administrative expenses.

Consumer Packaging's net sales increased by $2 million from the prior year quarter primarily attributed to an $8 million impact from selling price increases due to the pass through of higher resin prices, partially offset by a 1% base volume decline.

 

The operating income increase of $4 million from the prior year quarter is primarily attributed to a $5 million decrease in depreciation and amortization expense and a $5 million decrease in selling, general and administrative expense, partially offset by a $5 million unfavorable impact from under recovery of higher cost of goods sold.

Our cash flow from operating activities was $153 million and $985 million for the quarter and last four quarters ended December 2017, respectively.  The Company's adjusted free cash flow for the quarter and last four quarters ended December 2017 was $25 million and $606 million, respectively.  Our total debt less cash and cash equivalents at the end of the December 2017 quarter was $5,308 million.  Adjusted EBITDA for the four quarters ended December 30, 2017 was $1,390 million.

On February 6, 2018, we closed on our previously announced acquisition of the Clopay Plastic Products Company, Inc.("Clopay"), a subsidiary of Griffon Corporation for a purchase price of $475 million, which is preliminary, unaudited and subject to adjustment.  Clopay manufactures printed breathable films and is an innovator in the development of elastic films and laminates with product offerings uniquely designed for applications used in a number of markets including: hygiene, healthcare, construction and industrial protective apparel.  Clopay will be operated within the Health, Hygiene and Specialties segment.  The Company expects to realize annual cost synergies of approximately $20 million from the completion of the Clopay transaction.  To finance the purchase, the Company used the proceeds from our new $500 million 4.5% second priority senior secured notes issued in January 2018.

Given the completion of our Clopay acquisition and recent tax reform, we have increased our fiscal year 2018 cash flow from operations and adjusted free cash flow to $1,007 million and $630 million, respectively.  Additionally, our fiscal 2018 capital spending and cash interest costs are forecasted to be $340 million and $250 million, respectively.  Within our adjusted free cash flow guidance, we are also assuming a working capital use of $40 million and cash taxes to be $160 million, including the $37 million payment made in the first fiscal quarter under the Company's tax receivable agreement, along with other cash uses of $50 million related to items such as acquisition integration expenses and costs to achieve synergies.

The Company will host a conference call today, February 7, 2018, at 10 a.m. Eastern Time to discuss its first fiscal 2018 quarter results.  The telephone number to access the conference call is (800) 305-1078 (domestic), or (703) 639-1173 (international), conference ID 4959507.  We expect the call to last approximately one hour.  Interested parties are invited to listen to a live webcast and view the accompanying slides by visiting the Company's Investor page at www.berryglobal.com.  A replay of the conference call can also be accessed on the Investor page of the website beginning February 7, 2018, at 1 p.m. Eastern Time, to February 27, 2018, by calling (855) 859-2056 (domestic), or (404) 537-3406 (international), access code 4959507.

This press release includes non-GAAP financial measures such as operating EBITDA, adjusted EBITDA, adjusted net income, adjusted free cash flow, and cash interest expense. A reconciliation of these non-GAAP financial measures to comparable measures determined in accordance with accounting principles generally accepted in the United States of America (GAAP) is set forth at the end of this press release.

Statements in this release that are not historical, including statements relating to the expected future performance of the Company, are considered "forward looking" and are presented pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  You can identify forward-looking statements because they contain words such as "believes," "expects," "may," "will," "should," "would," "could," "seeks," "approximately," "intends," "plans," "estimates," "anticipates" "outlook," or "looking forward," or similar expressions that relate to our strategy, plans or intentions.  All statements we make relating to our estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates and financial results or to our expectations regarding future industry trends are forward-looking statements.  In addition, we, through our senior management team, from time to time make forward-looking public statements concerning our expected future operations and performance and other developments.  These forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those that we expected.

 

Berry Global Group, Inc.

Consolidated Statements of Income

(Unaudited)

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

Berry Global Group, Inc.

Consolidated Statements of Comprehensive Income

(Unaudited)
(in millions of dollars) 

Berry Global Group, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

 (in millions of dollars)

Current and Long-Term Debt

Berry Global Group, Inc.

   Condensed Consolidated Statements of Cash Flows

(Unaudited)

 (in millions of dollars)

Berry Global Group, Inc.

Condensed Consolidated Financial Statements

Segment Information

(Unaudited)

(in millions of dollars)

(1)	Other non-cash charges in the December 2017 quarter primarily includes $4 million of stock compensation expense.  Other non-cash charges in the December 2016 quarter primarily includes $3 million of stock compensation expense along with other non-cash charges.

(2)	Includes integration expenses and other business optimization costs.

Berry Global Group, Inc.

Reconciliation Schedules

(Unaudited)

(in millions of dollars, except per share data)

 

 

Net income per diluted share		$	1.20			$	0.40
Other expense (income), net			0.07				(0.01	)
Non-cash amortization from 2006 private sale			0.05				0.06
Restructuring and impairment			0.08				0.03
Other non-cash charges (6)			0.01				0.04
Business optimization costs (2)			0.01				0.02
Tax reform adjustments, net (9)			(0.70	)			—
Income tax impact on items above (7)			(0.05	)			(0.04	)
Adjusted net income per diluted share (10)		$	0.67			$	0.50

 

 

 

 

 

⁽¹⁾ Other non-cash charges in the December 2017 quarter primarily include $4 million of stock compensation expense and other non-cash charges.  The December 2016 quarter primarily includes $3 million of stock compensation expense and other non-cash charges.

⁽²⁾ Includes integration expenses and other business optimization costs.

⁽³⁾ Amortization excludes non-cash amortization from the 2006 private sale of $7 million and $8 million for the December 30, 2017 and December 31, 2016 quarters, respectively.

⁽⁴⁾ Represents Operating EBITDA for the AEP acquisition for the period of January 1, 2017 to January 19, 2017 and the Adchem acquisition for the months of January to June 2017.

⁽⁵⁾ Primarily represents unrealized cost savings related to acquisitions.

⁽⁶⁾ Other non-cash charges excludes $4 million of stock compensation expense for the quarter ended December 30, 2017.  Prior year quarter impact on adjusted net income per share would be $0.02.

⁽⁷⁾ Income tax effects on adjusted net income is calculated using 25% for the December 2017 quarter and 32% for the December 2016 quarter.  The rates used for each represents the Company's expected effective tax rate for each respective period.

⁽⁸⁾ Includes $37 million tax receivable agreement payment made in the December 2017 quarter.

⁽⁹⁾ Includes $95 million of net adjustments for valuing and transition tax related to the recently passed tax reform legislation.

⁽¹⁰⁾ Supplemental financial measures that are not required by, or presented in accordance with, accounting principles generally accepted in the United States ("GAAP").  These non-GAAP financial measures should not be considered as alternatives to operating or net income or cash flows from operating activities, in each case determined in accordance with GAAP.  These non-GAAP financial measures may be calculated differently by other companies, including other companies in our industry, limiting their usefulness as comparative measures.

We define "adjusted free cash flow" as cash flow from operating activities less additions to property, plant, and equipment and payments under the tax receivable agreement.  We believe adjusted free cash flow is useful to an investor in evaluating our liquidity because adjusted free cash flow and similar measures are widely used by investors, securities analysts, and other interested parties in our industry to measure a company's liquidity.  We also believe adjusted cash flow is useful to an investor in evaluating our liquidity as it can assist in assessing a company's ability to fund its growth through its generation of cash.  We believe cash interest expense is useful to investors by providing information regarding interest expense without regard to non-cash interest expense recognition which may vary based on financing structure and accounting methods.

Adjusted EBITDA is used by our lenders for debt covenant compliance purposes.  We also use Adjusted EBITDA and Operating EBITDA among other measures to evaluate management performance and in determining performance-based compensation.  Adjusted EBITDA and Operating EBITDA and similar measures are widely used by investors, securities analysts, and other interested parties in our industry to measure a company's performance.  We also believe EBITDA and adjusted net income are useful to an investor in evaluating our performance without regard to revenue and expense recognition, which can vary depending upon accounting methods.

 

Company Contact:

Dustin Stilwell

1+812.306.2964

ir@berryglobal.com

 

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