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

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.

 

NEWS RELEASE

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Berry Global Group, Inc. Reports Second Quarter Fiscal 2017 Results

EVANSVILLE, Ind. – May 3, 2017 – Berry Global Group, Inc. (NYSE:BERY) today reported results for its second fiscal 2017 quarter, referred to in the following as the March 2017 quarter.

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Net income for the March 2017 quarter was $72 million ($0.54 per diluted share) compared to $59 million ($0.47 per diluted share) in the prior year quarter.  Adjusted net income in the March 2017 quarter was 36 percent higher at $0.79 per diluted share compared to $0.58 per diluted share in the prior year quarter.

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Net sales increased 12% over the prior year quarter and was a quarterly record at $1 billion 806 million.  Operating income for the quarter increased to $175 million compared to $165 million in the prior year quarter.  Operating EBITDA was also a quarterly record at $336 million (18.6% of net sales).

·	Cash flow from operations for the last four quarters ended March 2017 was $829 million, and   adjusted free cash flow for the same period was $524 million.

·	We are reaffirming our fiscal 2017 guidance of projected cash flow from operations of $925 million and adjusted free cash flow of $550 million.

·	Increased our annual cost synergies for the AEP acquisition from our original guidance of $50 million to $70 million

"I am pleased to report that we had another quarter of record financial results.  Milestones for both revenue and operating EBITDA were achieved of $1 billion $806 million and $336 million, respectively.  Adjusted free cash flow improved 36% to $122 million, and adjusted net income was also 36% higher at 79 cents per diluted share," said Tom Salmon, CEO of Berry.

Comparison of the Quarterly Period Ended April 1, 2017 ("Current Quarter") and the Quarterly Period Ended April 2, 2016 ("Prior Year Quarter") are presented below:

The net sales increase of $192 million from the prior year quarter is primarily attributed to acquisition net sales of $205 million related to the AEP Industries, Inc. ("AEP") acquisition and selling price increases of $9 million, partially offset by a negative $15 million impact from a 1% volume decline and a $7 million negative impact from foreign currency changes.

The operating income increase of $10 million from the prior year quarter is primarily attributed to acquisition operating income of $19 million, a $10 million decrease in selling, general and administrative expense, and a $6 million decrease in depreciation and amortization.  These improvements were partially offset by a $9 million decline in our product mix and price/cost spread, a $10 million increase in business integration expenses, a negative $4 million impact from base volume declines, and an unfavorable impact from foreign currency changes.

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

Engineered Materials' net sales increased by $217 million from prior year quarter primarily attributed to acquisition net sales of $205 million and selling price increases of $18 million, partially offset by slightly lower base volumes.

The operating income increase of $19 million from prior year quarter is primarily attributed to acquisition operating income of $19 million, a $10 million improvement in our product mix and price/cost spread, and a $4 million reduction in selling, general and administrative expenses, partially offset by a $13 million increase in business integration expense.  The business integration expenses primarily consisted of a $5 million AEP purchase accounting inventory step-up and deal costs associated with the AEP transaction.

Health, Hygiene, and Specialties' net sales decreased by $4 million from prior year quarter primarily attributed to selling price decreases of $9 million and a $6 million unfavorable impact from currency translation, partially offset by a positive $10 million impact from a 2% base volume improvement.

The operating income decrease of $6 million from prior year quarter is primarily attributed to a $16 million decrease in price/cost spread and an unfavorable impact from foreign currency changes, partially offset by a $4 million improvement in productivity in manufacturing, a $4 million decrease in depreciation expense, and a $2 million impact from the base volume improvement.

Consumer Packaging's net sales decreased by $21 million from prior year quarter primarily attributed to a negative $20 million impact from a 3% base volume decline.  The volume decline was primarily attributed to soft consumer demand in portions of our Rigid Open Top product line.

The operating income decrease of $3 million from prior year quarter was primarily attributed to a $5 million impact from base volume declines, a $3 million decrease in price/cost spread, and a negative impact from productivity in manufacturing, partially offset by a $4 million decrease in selling, general and administrative expense and a decrease in business integration expenses.

Our cash from operating activities was $190 million for the March 2017 quarter and $829 million for the last four quarters ended March 2017.  The Company's adjusted free cash flow for the last four quarters ended was $524 million.

Our total debt less cash and cash equivalents at the end of the March 2017 quarter was $5,755 million.  Adjusted EBITDA for the four quarters ended April 1, 2017, was $1,387 million.

On April 3, 2017, we announced that we were changing our name to Berry Global Group, Inc., effective April 13, 2017.  Common shares of the Company stock continue to be traded on the New York Stock Exchange under the symbol BERY.  In addition, Berry Plastics Corporation, a wholly owned subsidiary of Berry Global Group, Inc. changed its name to Berry Global, Inc, effective April 13, 2017.  Along with the name change we presented a new Mission, 'Always Advancing to Protect What's Important,' and a new Company logo.

"Looking ahead, we will continue our focus on reducing our leverage ratio to a goal of below 4, on or before the end of fiscal 2017.  Additionally, we remain excited about our recent acquisition of AEP, and the results to date have validated our expectations of the synergy potential and scale advantages through the combined businesses.  Based on our progress to date, we are increasing our annual cost synergy target for the AEP acquisition from our initial $50 million to $70 million. Throughout the remainder of the year we will continue to work on further cost reduction opportunities," stated Salmon.

Today, we are also reaffirming our fiscal year 2017 projected cash flow from operations of $925 million and adjusted free cash flow of $550 million.  These estimates include the recent acquisition of AEP completed on January 20, 2017, the $60 million tax receivable payment that was made in the first fiscal quarter and assumes net capital expenditures of $315 million.  Additionally, our cash interest expense is forecasted to be $275 million for fiscal 2017.  Within our guidance, we are also assuming $80 million of cash used for other taxes, primarily related to state and international jurisdictions, and other cash uses of $60 million related to items such as acquisition integration expenses and costs to achieve synergies.

The Company will host a conference call today, May 3, 2017, at 10 a.m. Eastern Time to discuss its second quarter fiscal 2017 results.  The telephone number to access the conference call is (800) 305-1078 (domestic), or (703) 639-1173 (international), conference ID 7600170.  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, 2017, at 1 p.m. Eastern Time, to May 10, 2017, by calling (855) 859-2056 (domestic), or (404) 537-3406 (international), access code 7600170.

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.  Our "leverage ratio" means the ratio of (i) our total debt minus our cash and cash equivalents to (ii) our Adjusted EBITDA.

 

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

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Berry Global Group, Inc.

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Berry Global Group, Inc.

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Current and Long-Term Debt

 

 

Berry Global Group, Inc.

   Condensed Consolidated Statements of Cash Flows

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Berry Global Group, Inc.

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Segment Information

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Berry Global Group, Inc.

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Berry Global Group, Inc.

Reconciliation Schedules

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 ⁽¹⁾ Other non-cash charges in the March 2017 quarter primarily include $8 million of stock compensation expense, $5 million step-up of inventory to fair value related to the AEP Industries Inc. acquisition, and other non-cash charges.  The March 2016 quarter primarily includes $10 million of stock compensation expense.  For the four quarters ended March 2017 other non-cash charges primarily include $17 million of stock compensation expense, $5 million step-up of inventory to fair value related to the AEP Industries Inc. 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 $8 million for both the April 1, 2017 and April 2, 2016 quarters and $32 million for the four quarters ended April 1, 2017.

⁽⁴⁾ Unrealized cost savings primarily represents unrealized cost savings related to acquisitions.

⁽⁵⁾ Other expense (income), net for Adjusted net income per diluted share purposes excludes $9 million of tax reclassification offset in tax expense.

⁽⁶⁾ Income tax effects on adjusted net income were calculated using 32% for the March 2017 and 2016 quarters.  The rates used for each represents the Company's expected effective tax rate for each respective period.

⁽⁷⁾ 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.  Adjusted EBITDA is used by our lenders for debt covenant compliance purposes. Our projected adjusted free cash flow for fiscal 2017 assumes $925 million of cash flow from operations less $315 million of net additions to property, plant, and equipment and $60 million of payments under our tax receivable agreement.

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 these measures are useful to an investor in evaluating our performance and liquidity as these measures are widely used by investors, securities analysts and other interested parties in our industry to measure a company's performance and liquidity without regard to revenue and expense recognition, which can vary depending upon accounting methods.  These non-GAAP financial measures may be calculated differently by other companies, including other companies in our industry, limiting their usefulness as comparative measures

Investor Contact:

Dustin Stilwell

1+812.306.2964

ir@berryglobal.com

Media Contact:

Eva Schmitz

1+812.306.2424

evaschmitz@berryglobal.com

  

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