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

EVANSVILLE, Ind.--(BUSINESS WIRE)--Feb. 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.

Cash Flow and Capital Structure

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.

Recent Development

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.

Outlook

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.

Investor Conference Call

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.

About Berry

Berry Global Group, Inc. (NYSE:BERY), headquartered in Evansville, Indiana, is committed to its mission of ‘Always Advancing to Protect What’s Important,’ and proudly partners with its customers to provide them with value-added protective solutions. The Company is a leading global supplier of a broad range of innovative non-woven, flexible, and rigid products used every day within consumer and industrial end markets. Berry, a Fortune 500 company, generated $7.1 billion of sales in fiscal 2017. For additional information, visit Berry’s website at www.berryglobal.com.

Non-GAAP Financial Measures

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.

Forward Looking Statements

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.

Important factors that could cause actual results to differ materially from our expectations, which we refer to as cautionary statements, are disclosed under “Risk Factors” and elsewhere in our Annual Report on Form 10-K and subsequent filings with the Securities and Exchange Commission, including, without limitation, in conjunction with the forward-looking statements included in this release. All forward-looking information and subsequent written and oral forward-looking statements attributable to us, or to persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements. Some of the factors that we believe could affect our results include: (1) risks associated with our substantial indebtedness and debt service; (2) changes in prices and availability of resin and other raw materials and our ability to pass on changes in raw material prices on a timely basis; (3) the impact of potential changes in interest rates: (4) performance of our business and future operating results; (5) risks related to our acquisition strategy and integration of acquired businesses; (6) reliance on unpatented know-how and trade secrets; (7) increases in the cost of compliance with laws and regulations, including environmental, safety, and production and product laws and regulations; (8) risks related to disruptions in the overall economy and the financial markets may adversely impact our business; (9) catastrophic loss of one of our key manufacturing facilities, natural disasters, and other unplanned business interruptions; (10) risks of competition, including foreign competition, in our existing and future markets;(11) general business and economic conditions, particularly an economic downturn; (12) potential failure to realize the intended benefits from recent acquisitions( including the Clopay acquisition), including, without limitation, the inability to realize the anticipated cost synergies in the anticipated amounts or within the contemplated timeframes or cost expectations, the inability to realize the anticipated revenues, expenses, earnings and other financial results, and growth and expansion of the company’s operations, and the anticipated tax treatment; (13) risks related to international business, including foreign currency exchange rate risk and the risks of compliance with applicable export controls, sanctions, anti-corruption laws and regulations, (14) ability of our insurance to fully cover potential exposures and (15) the other factors discussed in the under the heading “Risk Factors” in our Annual Report on Form 10-K and subsequent filings with the Securities and Exchange Commission. We caution you that the foregoing list of important factors may not contain all of the material factors that are important to you. Accordingly, readers should not place undue reliance on those statements. All forward-looking statements are based upon information available to us on the date of this release. 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.

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.

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Source: Berry Global Group, Inc.

Berry Global Group, Inc.
Dustin Stilwell, +1 812-306-2964
ir@berryglobal.com