99.1		Press Release dated August 3, 2018

 

	News Release

 

Berry Global Group, Inc. Reports Third Quarter Fiscal 2018 Results;

 Confirms 2018 Fiscal Year Adjusted Free Cash Flow Guidance;

Announces Share Repurchase Program

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

 

Highlights (all comparisons made to the June 2017 Quarter)
●	Net income per diluted share up 3 percent to $0.81.
●	Adjusted net income per diluted share up 7 percent to $0.96.
●	Net sales increased 9 percent to $2.1 billion.
●	Operating income increased by 2 percent to $216 million.
●	Operating EBITDA was $374 million, an increase of 3 percent.
●	Announced authorization of new $500 million share repurchase program
●	Reaffirmed adjusted free cash flow guidance of $630 million for fiscal year 2018; including cash flow from operations of $987 million partially offset by net capital expenditures of $320 million and tax receivable payment of $37 million.

Commenting on the quarter, Tom Salmon, Chairman and Chief Executive Officer of Berry stated, "During the quarter we reported record net sales of $2.1 billion, growth of 9 percent compared to the prior year quarter.  Additionally, we had quarterly records for operating EBITDA and adjusted earnings per share of $374 million and $0.96, respectively."

"Specifically by segment, Consumer Packaging reported strong net sales and organic volume growth of 7 percent and 4 percent, respectively in the quarter, which was led by our foodservice products driven by stronger demand at quick service restaurants and convenience stores.  Within our Health, Hygiene & Specialties division we recorded strong revenue growth of 20 percent as well as an 11 percent improvement in Operating EBITDA, including the impact of the recently completed acquisition of Clopay.  Inside our Engineered Materials division, we recorded modest positive organic volume growth in our legacy business led by our tape and flexible packaging products."

Mr. Salmon continued, "Berry's financial performance and balance sheet have strengthened considerably over the past several years.  We are now in a position to return cash to shareholders while still maintaining financial flexibility to execute our strategic plan, further strengthen our balance sheet, and invest for future growth.  I am happy to announce that Berry's Board of Directors have approved a $500 million share repurchase program."

The net sales increase of $166 million from the prior year quarter was primarily attributed to acquisition net sales of $125 million, selling price increases of $37 million due to the pass through of higher resin prices, a $14 million favorable impact from foreign currency changes along with 1 percent base volume improvement, partially offset by a core sales decline of $19 million in legacy AEP locations as a result of business rationalizations.

The operating income increase of $4 million from the prior year quarter was primarily attributed to a $12 million decrease in selling, general, and administrative expense due to synergies and cost reductions, acquisition operating income of $9 million, a $4 million decrease in depreciation and amortization expense, a $2 million impact from the base volume improvement, and a $3 million favorable impact from foreign currency changes, partially offset by a $20 million negative impact from under recovery of higher cost of goods sold, and a $7 million earnings decline from legacy AEP locations.

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

Engineered Materials' net sales increase from the prior year quarter was primarily attributed to selling price increases of $8 million due to the pass through of higher resin prices, acquisition net sales of $7 million, a $2 million favorable impact from foreign currency changes, and a slight base volume improvement partially offset by a core sales decline of $19 million in legacy AEP locations as a result of business rationalizations.

The operating income decrease from the prior year quarter was primarily attributed to a $7 million earnings decline from legacy AEP locations and a $5 million increase in business integration expense, partially offset by a $4 million decrease in depreciation and amortization, and a $3 million decrease in selling, general, and administrative expense.

 

Health, Hygiene, and Specialties' net sales increased $120 million from the prior year quarter primarily attributed to acquisition net sales of $118 million, selling price increases of $9 million due to the pass through of higher resin prices, and a $12 million favorable impact from foreign currency changes, partially offset by a 3 percent base volume decline.

The operating income increase of $9 million from the prior year quarter was primarily attributed to acquisition operating income of $8 million, a $5 million decrease in selling, general, and administrative expenses, a $5 million decrease in business integration expenses, a $3 million favorable impact from foreign currency changes, and a $2 million decrease in depreciation and amortization, partially offset by a $11 million negative impact from under recovery of higher cost of goods sold, and a $3 million negative impact from the volume decline.

Consumer Packaging's net sales increased by $45 million from the prior year quarter, primarily attributed to a 4 percent base volume improvement along with selling price increases of $20 million due to the pass through of higher resin prices.

Operating income was flat compared to the prior year quarter and was positively impacted by a $4 million improvement in base volumes along with a $4 million decrease in selling, general and administrative expense offset by an $7 million negative impact from under recovery of higher cost of goods sold.

Our cash flow from operating activities was $271 million and $952 million for the quarter and last four quarters ended June 2018, respectively.  The Company's adjusted free cash flow for the quarter and last four quarters ended June 2018 was $185 million and $530 million, respectively.  Our total debt less cash and cash equivalents at the end of the June 2018 quarter was $5,580 million.  Adjusted EBITDA for the four quarters ended June 30, 2018 was $1,449 million.

Today the Company announced that its Board has unanimously approved a new $500 million share repurchase program.  The new share repurchase authorization allows for the repurchase of shares, from time to time, through open market purchases, privately negotiated transactions, Rule 10b5-1 plans, and any other purchase techniques deemed appropriate in accordance with applicable securities laws.  The timing of purchases will depend on market conditions.  The share repurchase program has no expiration date.

Today we are reaffirming our fiscal year 2018 adjusted free cash flow guidance of $630 million.  This includes cash flow from operations of $987 million partially offset by net capital expenditures of $320 million and the $37 million tax receivable payment that was made in the Company's first fiscal quarter.  This guidance includes a reduction to capital spending of $20 million along with a total $30 million of lower cash taxes and other cash costs.  The earnings reduction is being driven by ongoing cost inflation versus the timing lag of passing along these cost increases.  We are extremely proud of our history and predictability and have a proven track record of generating growth in annual free cash flow through various economic cycles and market conditions.

The Company will host a conference call today, August 3, 2018, at 10 a.m. Eastern Time to discuss its third quarter fiscal 2018 results.  The telephone number to access the conference call is (800) 305-1078 (domestic), or (703) 639-1173 (international), conference ID 2239647.  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 August 3, 2018, at 1 p.m. Eastern Time, to August 24, 2018, by calling (855) 859-2056 (domestic), or (404) 537-3406 (international), access code 2239647.

This press release includes non-GAAP financial measures such as operating EBITDA, adjusted EBITDA, adjusted net income, and adjusted free cash flow. 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)

 

 

Berry Global Group, Inc.

Condensed Consolidated Financial Statements

Segment Information

(Unaudited)

(in millions of dollars)

(1)

Other non-cash charges for the three quarterly periods ended June 2018 includes $20 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 three quarterly periods ended June 2017 primarily includes $16 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)

 

 

Net income per diluted share		$	0.81			$	0.79
Other expense (income), net			0.02				(0.01	)
Non-cash amortization from 2006 private sale			0.05				0.06
Restructuring and impairment			0.05				0.06
Other non-cash charges (6)			0.01				0.01
Business optimization costs (2)			0.06				0.04
Income tax impact on items above (7)			(0.04	)			(0.05	)
Adjusted net income per diluted share (9)		$	0.96			$	0.90

 

 

		Estimated Fiscal 2018
Cash flow from operating activities		$	987
Additions to property, plant, and equipment			(320	)
Tax receivable agreement payment (8)			(37	)
Adjusted free cash flow (9)		$	630

(1)

Other non-cash charges in the June 2018 quarter includes $6 million of stock compensation expense and other non-cash charges.  Other non-cash charges in the June 2017 quarter primarily includes $5 million of stock compensation expense along with other non-cash charges. For the four quarters ended June 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 June 2018 and June 2017 quarters, respectively.

(4)	Represents Operating EBITDA for the Clopay acquisition for the period of July 1, 2017 - February 6, 2018.

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

(6)	Other non-cash charges excludes $6 million and $5 million of stock compensation expense for the quarters ended June 30, 2018 and July 1, 2017, respectively.

(7)	Income tax effects on adjusted net income is calculated using 25 percent for the June 2018 quarter and 32 percent for the June 2017 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)

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.

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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