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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

For the quarterly period ended July 2, 2022

OR

For the transition period from __________ to __________

Commission File Number 001-35672

Securities registered pursuant to Section 12(b) of the Exchange Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes ☒ No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐  No  ☒

There were 125.1 million shares of common stock outstanding at August 4, 2022.

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

Information included or incorporated by reference in Berry Global Group, Inc.’s filings with the U.S. Securities and Exchange Commission (the “SEC”) and press releases or other public statements contains or may contain forward-looking statements.  This report includes “forward-looking” statements with respect to our financial condition, results of operations and business and our expectations or beliefs concerning future events.  These statements contain words such as “believes,” “expects,” “may,” “will,” “should,” “would,” “could,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” “project,” “outlook,” “anticipates” or “looking forward” or similar expressions that relate to our strategy, plans, intentions, or expectations.  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, 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.  All forward-looking statements are made only as of the date hereof, and we undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

Additionally, we caution readers that the list of important factors discussed in our most recent Form 10-K in the section titled “Risk Factors” may not contain all of the material factors that are important to you.  In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this report may not in fact occur.  Accordingly, readers should not place undue reliance on those statements.

Berry Global Group, Inc.

Form 10-Q Index

For Quarterly Period Ended July 2, 2022

Berry Global Group, Inc.

Consolidated Statements of Income

(Unaudited)

(in millions of dollars, except per share amounts)

Consolidated Statements of Comprehensive Income

(Unaudited)

(in millions of dollars)

See notes to consolidated financial statements.

Berry Global Group, Inc.

Consolidated Balance Sheets

(in millions of dollars)

See notes to consolidated financial statements.

Berry Global Group, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

(in millions of dollars)

See notes to consolidated financial statements.

Berry Global Group, Inc.

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

(in millions of dollars)

See notes to consolidated financial statements.

Berry Global Group, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

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

1.  Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements of Berry Global Group, Inc. (“the Company,” “we,” or “Berry”) 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 for interim reporting.  Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.  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.  The Company’s U.S. based results for fiscal 2022 and fiscal 2021 are based on a fifty-two and fifty-three week period, respectively.  The extra week in fiscal 2021 occurred in the first quarter.  The Company has recast certain prior period amounts to conform to current reporting.  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 most recent Form 10-K filed with the Securities and Exchange Commission.

2.  Recent Accounting Pronouncements

Reference Rate Reform

In 2020, the FASB issued ASU 2020-04, Reference Rate Reform - Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848).  This standard provides temporary optional expedients and exceptions to the GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as SOFR.  ASU 2020-04 is effective upon issuance and generally can be applied through the end of calendar year 2022.  The Company is currently evaluating the impact and does not anticipate a material impact on consolidated financial statements or disclosures. 

3.  Revenue and Accounts Receivable

Our revenues are primarily derived from the sale of non-woven, flexible and rigid products to customers.  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.  If the consideration agreed to in a contract includes a variable amount, we estimate the amount of consideration we expect to be entitled to in exchange for transferring the promised goods to the customer using the most likely amount method.  Our main source of variable consideration is customer rebates.  There are no material instances where variable consideration is constrained and not recorded at the initial time of sale.  Generally, our revenue is recognized at a point in time for standard promised goods at the time of shipment, when title and risk of loss pass to the customer.  The accrual for customer rebates was $101 million and $104 million at July 2, 2022 and October 2, 2021, respectively, and is included in Other current liabilities on the Consolidated Balance Sheets.  The Company disaggregates revenue based on reportable business segment, geography, and significant product line.  Refer to Note 10. Segment and Geographic Data for further information.

Accounts receivable are presented net of allowance for credit losses of $19 million and $21 million at July 2, 2022 and October 2, 2021, respectively.  The Company records its 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, including customer-based supply chain financing programs, to sell certain receivables to third-party financial institutions.  Agreements which 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 accounts receivable on the consolidated balance sheets and the proceeds are included in the cash flows from operating activities in the consolidated statements of cash flows.  The fees associated with the transfer of receivables for all programs were not material for any of the periods presented.

4.  Disposition

During fiscal 2022, the Company completed the sale of its rotational molding business, which was operated in the Consumer Packaging International segment for net proceeds of $108 million.  In fiscal 2021, the rotational molding business recorded net sales of $146 million.

5.  Restructuring and Transaction Activities

The table below includes the significant components of restructuring and transaction activities, by reporting segment:

		Quarterly Period Ended								Three Quarterly Periods Ended
		July 2, 2022				July 3, 2021				July 2, 2022				July 3, 2021
Consumer Packaging International		$	3			$	3			$	10			$	44
Consumer Packaging North America			1				—				4				1
Health, Hygiene & Specialties			3				—				2				—
Engineered Materials			—				1				2				(4	)
Consolidated		$	7			$	4			$	18			$	41

The table below sets forth the activity with respect to the restructuring and transaction activities accrual at July 2, 2022:

		Restructuring
		Employee Severance and Benefits				Facility Exit Costs				Transaction Activities				Total
Balance as of October 2, 2021		$	6			$	5			$	—			$	11
Charges			4				7				7				18
Cash			(6	)			(9	)			(7	)			(22	)
Balance as of July 2, 2022		$	4			$	3			$	—			$	7

6.  Leases

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

We recognize right-of-use assets and lease liabilities for leases with original lease terms greater than one year based on the present value of lease payments over the lease term using our incremental borrowing rate on a collateralized basis.  Short-term leases, with original lease terms of less than one year, are not recognized on the balance sheet.  We are party to certain leases, namely for manufacturing facilities, which offer renewal options to extend the original lease term.  Renewal options are included in the right-of-use asset and lease liability based on our assessment of the probability that the options will be exercised.

Supplemental lease information is as follows:

Leases	Classification		July 2, 2022				October 2, 2021
Operating leases:
Operating lease right-of-use assets	Right-of-use assets		$	522			$	562
Current operating lease liabilities	Other current liabilities			107				113
Noncurrent operating lease liabilities	Operating lease liability			432				466
Finance leases:
Finance lease right-of-use assets	Property, plant, and equipment, net		$	40			$	57
Current finance lease liability	Current portion of long-term debt			10				14
Noncurrent finance lease liabilities	Long-term debt, less current portion			27				38

						Three Quarterly Periods Ended
Lease Type	Cash Flow Classification		Lease Expense Category			July 2, 2022				July 3, 2021
Operating	Operating		Lease cost			$	100			$	85
Finance	Operating		Interest expense				1				2
Finance	Financing		-				14				19
Finance	-		Amortization of right-of-use assets				7				9

Right-of-use assets obtained in exchange for new operating lease liabilities were $5 million and $26 million for the quarterly and three quarterly periods ended July 2, 2022, respectively.

7.  Long-Term Debt

Long-term debt consists of the following:

Facility	Maturity Date		July 2, 2022				October 2, 2021
Term loan	July 2026		$	3,440				3,440
Revolving line of credit	May 2024			170				—
0.95% First Priority Senior Secured Notes	February 2024			800				800
1.00% First Priority Senior Secured Notes (a)	July 2025			734				810
1.57% First Priority Senior Secured Notes	January 2026			1,525				1,525
4.875% First Priority Senior Secured Notes	July 2026			1,250				1,250
1.65% First Priority Senior Secured Notes	January 2027			400				400
1.50% First Priority Senior Secured Notes (a)	July 2027			393				434
4.50% Second Priority Senior Secured Notes	February 2026			300				300
5.625% Second Priority Senior Secured Notes	July 2027			500				500
Debt discounts and deferred fees				(65	)			(77	)
Finance leases and other	Various			56				78
Total long-term debt				9,503				9,460
Current portion of long-term debt				(15	)			(21	)
Long-term debt, less current portion			$	9,488				9,439

(a)	Euro denominated

Debt discounts and deferred financing fees are presented net of Long-term debt, less the current portion on the Consolidated Balance Sheets and are amortized to Interest expense, net on the Consolidated Statements of Income through maturity. 

8.  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 interest rates and 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.  The Company settled its €250 million swap agreement which matured May 2022 for proceeds of $6 million.  As of July 2, 2022, the swap agreements mature June 2024 (€1,625 million) and July 2027 (£700 million).  In addition to cross-currency swaps, we hedge a portion of our foreign currency risk by designating foreign currency denominated long-term debt as net investment hedges of certain foreign operations.  As of July 2, 2022, we had outstanding long-term debt of €785 million that was designated as a hedge of our net investment in certain euro-denominated foreign subsidiaries.  When valuing cross-currency swaps the Company utilizes Level 2 inputs (substantially observable).

Interest Rate Swaps

The primary purpose of the Company’s interest rate swap activities is to manage interest expense variability associated with our outstanding variable rate term loan debt.  When valuing interest rate swaps the Company utilizes Level 2 inputs (substantially observable).

During fiscal 2022, the Company elected to cash settle existing interest rate swaps and received net proceeds of $69 million.  The offset is included in Accumulated other comprehensive loss and is being amortized to Interest expense through the term of the original swaps.  Additionally, the Company entered into $450 million and $400 million interest rate swap transactions that swap a one-month variable LIBOR contract for a fixed annual rate.

As of July 2, 2022, the Company effectively had (i) a $450 million interest rate swap transaction that swaps a one-month variable LIBOR contract for a fixed annual rate of 2.765%, with an expiration in June 2026, (ii) a $400 million interest rate swap transaction that swaps a one-month variable LIBOR contract for a fixed annual rate of 2.733% with an expiration in June 2026, (iii) a $884 million interest rate swap transaction that swaps a one-month variable LIBOR contract for a fixed annual rate of 1.857%, with an expiration in June 2024, and (iv) a $473 million interest rate swap transaction that swaps a one-month variable LIBOR contract for a fixed annual rate of 2.050%, with an expiration in June 2024.

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:

Derivative Instruments	Hedge Designation	Balance Sheet Location		July 2, 2022				October 2, 2021
Cross-currency swaps	Designated	Other assets		$	18			$	—
Cross-currency swaps	Designated	Other long-term liabilities			40				323
Interest rate swaps	Designated	Other assets			34				—
Interest rate swaps	Designated	Other long-term liabilities			—				82
Interest rate swaps	Not designated	Other assets			7				—
Interest rate swaps	Not designated	Other long-term liabilities			81				49

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

			Quarterly Period Ended								Three Quarterly Periods Ended
Derivative Instruments	Statements of Income Location		July 2, 2022				July 3, 2021				July 2, 2022				July 3, 2021
Cross-currency swaps	Interest expense		$	(5	)		$	(2	)		$	(12	)		$	(6	)
Interest rate swaps	Interest expense			11				18				35				52

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 annual 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.  The Company determined Goodwill and other indefinite lived assets were not impaired in our annual fiscal 2021 assessment.  No impairment indicators were identified in the current quarter.

Included in the following table are the major categories of assets measured at fair value on a non-recurring basis as of July 2, 2022 and October 2, 2021, along with the impairment loss recognized on the fair value measurement during the period:

		As of July 2, 2022
		Level 1				Level 2				Level 3				Total				Impairment
Indefinite-lived trademarks		$	—			$	—			$	248			$	248			$	—
Goodwill			—				—				4,969				4,969				—
Definite lived intangible assets			—				—				1,725				1,725				—
Property, plant, and equipment			—				—				4,560				4,560				—
Total		$	—			$	—			$	11,502			$	11,502			$	—

		As of October 2, 2021
		Level 1				Level 2				Level 3				Total				Impairment
Indefinite-lived trademarks		$	—			$	—			$	248			$	248			$	—
Goodwill			—				—				5,192				5,192				—
Definite lived intangible assets			—				—				1,994				1,994				—
Property, plant, and equipment			—				—				4,677				4,677				1
Total		$	—			$	—			$	12,111			$	12,111			$	1

The Company’s financial instruments consist primarily of cash and cash equivalents, long-term debt, interest rate and cross-currency swap agreements, and finance lease obligations.  The book value of our marketable long-term indebtedness exceeded fair value by $456 million as of July 2, 2022.  The Company’s long-term debt fair values were determined using Level 2 inputs (substantially observable). 

9.  Income Taxes

On a year-to-date comparison to the statutory rate, the higher effective tax rate was negatively impacted by state taxes and global intangible low-taxed income provisions, partially offset by other discrete items.

10.  Segment and Geographic Data

The Company’s operations are organized into four reporting segments: Consumer Packaging International, Consumer Packaging North America, Health, Hygiene & Specialties, and Engineered Materials.  The structure is designed to align us with our customers, provide optimal service, drive future growth, and to facilitate synergies realization.

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

		Quarterly Period Ended								Three Quarterly Periods Ended
		July 2, 2022				July 3, 2021				July 2, 2022				July 3, 2021
Net sales:
Consumer Packaging International		$	1,096			$	1,095			$	3,290			$	3,143
Consumer Packaging North America			927				847				2,659				2,264
Health, Hygiene & Specialties			788				828				2,429				2,349
Engineered Materials			915				905				2,696				2,425
Total net sales		$	3,726			$	3,675			$	11,074			$	10,181
Operating income:
Consumer Packaging International		$	82			$	79			$	248			$	214
Consumer Packaging North America			104				76				235				212
Health, Hygiene & Specialties			56				113				186				323
Engineered Materials			94				75				237				231
Total operating income		$	336			$	343			$	906			$	980
Depreciation and amortization:
Consumer Packaging International		$	78			$	88			$	242			$	258
Consumer Packaging North America			53				53				160				164
Health, Hygiene & Specialties			44				43				133				130
Engineered Materials			28				28				85				87
Total depreciation and amortization		$	203			$	212			$	620			$	639

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

		Quarterly Period Ended								Three Quarterly Periods Ended
		July 2, 2022				July 3, 2021				July 2, 2022				July 3, 2021
Net sales:
United States and Canada		$	2,030			$	1,937			$	5,978			$	5,342
Europe			1,320				1,308				3,937				3,658
Rest of world			376				430				1,160				1,181
Total net sales		$	3,726			$	3,675			$	11,074			$	10,181

11.  Contingencies and Commitments

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, we believe that any ultimate liability would not be material to our financial statements.

The Company has various purchase commitments for raw materials, supplies, and property and equipment incidental to the ordinary conduct of business.

12.  Share Repurchase Program

During the quarterly period ended July 2, 2022, the Company repurchased and retired 5,114 thousand shares for $286 million.  For the three quarterly periods ended July 2, 2022, the Company repurchased and retired 10,870 thousand shares for $637 million.  Authorized share repurchases of $414 million remain available to the Company. 

13.  Basic and Diluted Earnings 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.

Diluted EPS includes the effects of options and restricted stock units, if dilutive.

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

		Quarterly Period Ended								Three Quarterly Periods Ended
(in millions, except per share amounts)		July 2, 2022				July 3, 2021				July 2, 2022				July 3, 2021
Numerator
Consolidated net income		$	207			$	194			$	533			$	505
Denominator
Weighted average common shares outstanding - basic			128.6				135.1				132.6				134.3
Dilutive shares			2.1				3.4				3.0				3.4
Weighted average common and common equivalent shares outstanding - diluted			130.7				138.5				135.6				137.7
Per common share earnings
Basic		$	1.61			$	1.44			$	4.02			$	3.76
Diluted		$	1.58			$	1.40			$	3.93			$	3.67

1.2 million shares were excluded from the diluted EPS calculation for the quarterly and three quarterly periods ended July 2, 2022 as their effect would be anti-dilutive.  No shares were excluded for the quarterly and three quarterly periods ended July 3, 2021. 

14.  Accumulated Other Comprehensive Loss

The components and activity of Accumulated other comprehensive loss are as follows:

Quarterly Period Ended		Currency Translation				Defined Benefit Pension and Retiree Health Benefit Plans				Derivative Instruments				Accumulated Other Comprehensive Loss
Balance at April 2, 2022		$	(139	)		$	(67	)		$	25			$	(181	)
Other comprehensive income (loss) before reclassifications			(159	)			—				18				(141	)
Net amount reclassified			—				—				1				1
Balance at July 2, 2022		$	(298	)		$	(67	)		$	44			$	(321	)

		Currency Translation				Defined Benefit Pension and Retiree Health Benefit Plans				Derivative Instruments				Accumulated Other Comprehensive Loss
Balance at April 3, 2021		$	(173	)		$	(116	)		$	(86	)		$	(375	)
Other comprehensive income (loss) before reclassifications			91				—				(5	)			86
Net amount reclassified			—				—				3				3
Balance at July 3, 2021		$	(82	)		$	(116	)		$	(88	)		$	(286	)

Three Quarterly Periods Ended		Currency Translation				Defined Benefit Pension and Retiree Health Benefit Plans				Derivative Instruments				Accumulated Other Comprehensive Loss
Balance at October 2, 2021		$	(154	)		$	(67	)		$	(75	)		$	(296	)
Other comprehensive income (loss) before reclassifications			(144	)			—				113				(31	)
Net amount reclassified			—				—				6				6
Balance at July 2, 2022		$	(298	)		$	(67	)		$	44			$	(321	)

		Currency Translation				Defined Benefit Pension and Retiree Health Benefit Plans				Derivative Instruments				Accumulated Other Comprehensive Loss
Balance at September 26, 2020		$	(278	)		$	(116	)		$	(157	)		$	(551	)
Other comprehensive income before reclassifications			196				—				62				258
Net amount reclassified			—				—				7				7
Balance at July 3, 2021		$	(82	)		$	(116	)		$	(88	)		$	(286	)