Delaware	1-35672	20-5234618
(State of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

On May 3, 2018, Berry Global Group, Inc. ("Berry") issued a press release regarding its financial results for the quarter ended March 31, 2018.  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.

Exhibit
Number  Description

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

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Berry Global Group, Inc. Reports Second Quarter Fiscal 2018 Results and Confirms Fiscal Year Adjusted Free Cash Flow Guidance

EVANSVILLE, Ind. – May 3, 2018 – Berry Global Group, Inc. (NYSE:BERY) today reported results for its second fiscal 2018 quarter, referred to in the following as the March 2018 quarter.

 

 

Highlights (all comparisons made to the March 2017 quarter)
●	Net income per diluted share increased 22 percent to $0.66.
●	Adjusted net income per diluted share up 12 percent to $0.84.
●	Net sales increased 9 percent to $2.0 billion.
●	Operating income increased by 7 percent to $188 million.
●	Operating EBITDA was $350 million, an increase of 4 percent.
●	Increased annual cost synergy expectation relating to the Clopay acquisition to $40 million.
●	Reaffirmed guidance for fiscal year 2018 cash flow from operations of $1,007 million and adjusted free cash flow of $630 million.

 

Commenting on the quarter, Tom Salmon, Chairman and Chief Executive Officer of Berry stated, "I am proud to report we had March quarterly records for net sales, operating EBITDA, and adjusted earnings per share of $1 billion $967 million, $350 million and $0.84, respectively."

"We had another solid quarter of sales and earnings in our Engineered Materials division as net sales increased 6 percent and operating EBITDA improved by 17 percent compared to the prior year quarter.  Within our Health, Hygiene & Specialties division, excluding South America, our nonwoven product volumes grew +2 percent compared to the prior year quarter.  Further, we believe the addition of the Clopay Plastic Products Company, Inc.("Clopay") provides an enhanced product offering that reduces cost and provides improved performance in our global hygiene films offerings.  Based on our progress to-date, we are increasing our annual cost synergy target to $40 million from our original guidance of $20 million when we announced the deal.  Additionally our Consumer Packaging division saw strength in foodservice products from quick service restaurants and convenience stores.  We continue to partner with certain customers in our core foodservice product portfolio to address unmet needs and continue to make investments introducing technologically advanced solutions to the market at a lower cost with improved functionality and sustainability."

The net sales increase of $161 million from the prior year quarter was primarily attributed to acquisition net sales of $106 million, selling price increases of $59 million due to the pass through of higher resin prices, and a $34 million favorable impact from foreign currency changes, partially offset by a 2% base volume decline.

The operating income increase of $13 million from the prior year quarter was primarily attributed to acquisition operating income of $20 million, a $13 million decrease in selling, general and administrative expense due to synergies and cost reductions, a $7 million decrease in depreciation and amortization, and a $5 million favorable impact from foreign currency changes, partially offset by a $22 million negative impact from under recovery of higher cost of goods sold, and a $7 million negative impact from lower base volumes, and a $3 million increase in business integration expenses.

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

Engineered Materials' net sales increased by $35 million from the prior year quarter primarily attributed to acquisition net sales of $34 million, selling price increases of $19 million due to the pass through of higher resin prices, and a $3 million favorable impact from foreign currency changes, partially offset by a 3% base volume decline.

The operating income increase of $27 million from the prior year quarter was primarily attributed to acquisition operating income of $15 million, a $4 million decrease in selling, general and administrative expense, an $8 million decrease in business integration expenses, and a $3 million decrease in depreciation and amortization, partially offset by a $4 negative million impact from lower base volumes.

 

Health, Hygiene, and Specialties' net sales increased $109 million from the prior year quarter primarily attributed to acquisition net sales of $72 million, selling price increases of $15 million due to the pass through of higher resin prices, and a $31 million favorable impact from foreign currency changes, partially offset by a 1% base volume decline.

The operating income decrease of $11 million from the prior year quarter was primarily attributed to a $13 million negative impact from under recovery of higher cost of goods sold, and an $11 million increase in business integration expenses related to the Clopay acquisition, partially offset by acquisition operating income of $5 million, a $5 million favorable impact from foreign currency changes, and a $4 million decrease in selling, general, and administrative expense.

Consumer Packaging's net sales increased by $17 million from the prior year quarter primarily attributed to selling price increases of $25 million due to the pass through of higher resin prices, partially offset by a 1% base volume decline.

The operating income decrease of $3 million from the prior year quarter was primarily attributed to a $10 million negative impact from under recovery of higher cost of goods sold, partially offset by a $5 million decrease in selling, general and administrative expense and a $3 million decrease in depreciation and amortization.

Our cash flow from operating activities was $132 million and $927 million for the quarter and last four quarters ended March 2018, respectively.  The Company's adjusted free cash flow for the quarter and last four quarters ended March 2018 was $42 million and $526 million, respectively.  Our total debt less cash and cash equivalents at the end of the March 2018 quarter was $5,735 million.  Adjusted EBITDA for the four quarters ended March 31, 2018 was $1,464 million.

On February 6, 2018, we closed on our previously announced acquisition of Clopay for a purchase price of $474 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 is operated within the Health, Hygiene and Specialties segment.  The Company has revised its original cost synergy estimate and now expects to realize annual cost synergies of approximately $40 million from the completion of the Clopay transaction.  To finance the purchase, the Company used the proceeds from the issuance of $500 million 4.5% second priority senior secured notes.

Today we are reaffirming our fiscal year 2018 projected cash flow from operations of over $1 billion and adjusted free cash flow of $630 million, which includes the cash flow from operations partially offset by net capital expenditures of $340 million as well as $37 million of payments made under the tax receivable agreement.  Additionally, within our adjusted free cash flow guidance we are assuming our fiscal 2018 cash interest costs to be $250 million, a working capital use of $40 million, cash taxes to be $130 million, including the $37 million payment made in the first fiscal quarter under the Company's tax receivable agreement, and other cash uses of $50 million related to items such as acquisition integration expenses and costs to achieve synergies.  We are extremely proud of our history and predictability, as we have exceeded our free cash flow targets every single year as a public company.

The Company will host a conference call today, May 3, 2018, at 10 a.m. Eastern Time to discuss its second quarter fiscal 2018 results.  The telephone number to access the conference call is (800) 305-1078 (domestic), or (703) 639-1173 (international), conference ID 9889838.  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 May 3, 2018, at 1 p.m. Eastern Time, to May 24, 2018, by calling (855) 859-2056 (domestic), or (404) 537-3406 (international), access code 9889838.

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)

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 March 2018 quarter includes $10 million of stock compensation expense, a $3 million inventory step up charge related to the Clopay acquisition and other non-cash charges.  Other non-cash charges in the March 2017 quarter primarily includes $8 million of stock compensation expense, a $5 million inventory step-up charge related to the AEP acquisition along with other non-cash charges.

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

 

Berry Global Group, Inc.

Condensed Consolidated Financial Statements

Segment Information

(Unaudited)

(in millions of dollars)

(1)

Other non-cash charges for the two quarterly periods ended March 2018 includes $14 million of stock compensation expense, a $3 million inventory step up charge related to the Clopay acquisition and other non-cash charges.  Other non-cash charges for the two quarterly periods ended March 2017 primarily includes $11 million of stock compensation expense, a $5 million inventory step-up charge related to the AEP acquisition 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)

 

⁽¹⁾ Other non-cash charges in the March 2018 quarter includes $10 million of stock compensation expense, a $3 million inventory step up charge related to the Clopay acquisition and other non-cash charges.  Other non-cash charges in the March 2017 quarter primarily includes $8 million of stock compensation expense, a $5 million inventory step-up charge related to the AEP acquisition along with other non-cash charges. For the four quarters ended March 2018 other non-cash charges primarily includes $23 million of stock compensation expense, a $3 million inventory step up charge related to the Clopay acquisition 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 March 2018 and March 2017 quarters, respectively.

⁽⁴⁾ Represents Operating EBITDA for the Adchem acquisition for the months of April to June 2017 and the Clopay acquisition for the period of April 1, 2017 - February 6, 2018.

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

⁽⁶⁾ Other expense (income), net for adjusted net income per diluted share purposes for the April 1, 2017 quarter excludes $9 million of tax reclassification offset in tax expense.

⁽⁷⁾ Other non-cash charges excludes $10 million and $8 million of stock compensation expense for the quarters ended March 31, 2018 and April 1, 2017, respectively.

⁽⁸⁾ Income tax effects on adjusted net income is calculated using 25% for the March 2018 quarter and 32% for the March 2017 quarter.  The rates used for each represents the Company's expected effective tax rate for each respective period.

⁽⁹⁾ Includes $37 million tax receivable agreement payment made in the December 2017 quarter.

⁽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

 

 

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