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.”
June 2018 Quarter
Results
Consolidated Overview June
Quarter (in millions of dollars)
Current Prior
$ Change
% Change Net sales
$ 2,072 $
1,906 $ 166 9 % Operating income
216 212 4 2 %
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 June
Quarter (in millions of dollars)
Current Prior
$ Change
% Change Net sales
$ 687 $ 686
$ 1 - % Operating income
94 99 (5 ) (5 )%
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
June Quarter (in millions of
dollars)
Current Prior
$ Change
% Change Net sales
$ 726 $ 606
$ 120 20 % Operating income
62 53 9 17 %
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 June Quarter
(in millions of dollars)
Current
Prior
$ Change
% Change Net sales
$ 659 $ 614
$ 45 7 % Operating income
60 60 - - %
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.
Cash Flow and Capital
Structure
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.
$500 Million Share Repurchase
Program
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.
Outlook
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.
Investor Conference Call
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.
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, 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.
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, 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) the 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.
Berry Global Group, Inc. Consolidated
Statements of Income
(Unaudited)
(in millions of dollars, except per share
data amounts)
Quarterly Period Ended Three Quarterly Periods
Ended
June 30,2018
July 1,2017
June 30,2018
July 1,2017
Net sales
$ 2,072 $ 1,906
$
5,815 $ 5,214 Costs and expenses: Cost of goods sold
1,690 1,518
4,733 4,177 Selling, general and
administrative
119 128
366 373 Amortization of
intangibles
40 40
116 113 Restructuring and
impairment charges
7 8
33
18 Operating income
216 212
567 533
Other expense (income), net
3 (1 )
17 18
Interest expense, net
67 68
195 203 Income before income taxes
146
145
355 312 Income tax expense (benefit)
36
38
(8 ) 82 Net income
$ 110 $ 107
$ 363 $ 230
Net income per share: Basic
$ 0.84 $ 0.82
$ 2.76 $ 1.82 Diluted
0.81 0.79
2.67
1.75 Outstanding weighted-average shares: (in millions)
Basic
131.7 129.9
131.3 126.6 Diluted
135.4
135.2
135.8 131.4
Consolidated
Statements of Comprehensive Income
(Unaudited)
(in millions of dollars)
Quarterly Period Ended Three Quarterly Periods
Ended
June 30,2018
July 1,2017
June 30,2018
July 1,2017
Net income
$ 110 $ 107
$ 363 $ 230
Currency translation
(92 ) 24
(109 ) 4
Pension and other postretirement benefits
— —
(1
) 13 Interest rate hedges
6 (1 )
47 23
Provision for income taxes
(2 ) —
(13 ) (8 ) Other comprehensive
income, net of tax
(88 ) 23
(76 ) 32 Comprehensive income
$ 22 $ 130
$ 287 $
262
Berry Global Group, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions of dollars)
June 30,2018
September 30,2017
Assets: Cash and cash equivalents
$ 365 $ 306
Accounts receivable, net
932 847 Inventories
955 762
Other current assets
85 89 Property, plant, and equipment,
net
2,507 2,366 Goodwill, intangible assets, and other
long-term assets
4,198 4,106 Total assets
$ 9,042 $ 8,476
Liabilities and
stockholders' equity: Current liabilities, excluding debt
$ 1,127 $ 1,101 Current and long-term debt
5,945 5,641 Other long-term liabilities
631 719
Stockholders’ equity
1,339 1,015 Total
liabilities and stockholders' equity
$ 9,042 $ 8,476
Current and Long-Term Debt
June 30,2018
September 30,2017
(in millions of dollars) Revolving line of credit
$
— $ — Term loans
3,753 3,957 5½% Second priority
notes
500 500 6 % Second priority notes
400 400 5⅛ %
Second priority notes
700 700 4½ % Second priority notes
500 — Debt discounts and deferred fees
(46 )
(48 ) Capital leases and other
138 132
Total debt
$ 5,945 $ 5,641
Berry Global Group, Inc. Condensed
Consolidated Statements of Cash Flows
(Unaudited)
(in millions of dollars)
Three Quarterly Periods Ended
June 30,2018
July 1,2017
Cash flows from operating activities: Net income
$ 363 $ 230 Depreciation
281 270 Amortization
of intangibles
116 113 Other non-cash items
— 87
Working capital
(204 ) (120 ) Net cash
from operating activities
556 580
Cash flows from
investing activities: Additions to property, plant, and
equipment
(270 ) (201 ) Proceeds from sale of assets
3 4 Other investing activities, net
— (1 )
Acquisitions of businesses, net of cash acquired
(474
) (515 ) Net cash from investing activities
(741 ) (713 )
Cash flows from financing
activities: Proceeds from long-term borrowings
497 545
Repayments on long-term borrowings
(224 ) (427 )
Proceeds from issuance of common stock
17 26 Debt financing
costs
(1 ) (4 ) Payment of tax receivable agreement
(37 ) (60 ) Net cash from financing
activities
252 80 Effect of
exchange rate changes on cash
(8 ) 5 Net change in
cash
(59 ) (48 ) Cash and cash equivalents at
beginning of period
306 323 Cash
and cash equivalents at end of period
$ 365 $
275
Berry Global Group, Inc.
Condensed Consolidated Financial Statements Segment
Information
(Unaudited)
(in millions of dollars)
Quarterly Period Ended June 30, 2018
ConsumerPackaging
Health, Hygiene&
Specialties
EngineeredMaterials
Total Net sales
$ 659 $
726 $ 687 $ 2,072
Operating income
$ 60 $ 62 $
94 $ 216 Depreciation and amortization
59 51 26 136 Restructuring and
impairment charges
1 4 2 7 Other
non-cash charges (1)
2 2 3 7 Business
optimization costs (2)
— 4
4 8 Operating EBITDA
$ 122
$ 123 $ 129 $ 374
Quarterly Period Ended July 1, 2017
ConsumerPackaging
Health, Hygiene& Specialties
EngineeredMaterials
Total Net sales $ 614 $ 606 $ 686 $ 1,906 Operating
income $ 60 $ 53 $ 99 $ 212 Depreciation and amortization 56 46 30
132 Restructuring and impairment charges 2 4 2 8 Other non-cash
charges (1) 3 3 1 7 Business optimization costs (2) —
5 — 5 Operating EBITDA $ 121 $ 111 $ 132 $ 364
(1) Other non-cash charges in the June 2018 quarter
primarily 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. (2) Includes integration expenses and other business
optimization costs.
Berry Global Group, Inc.
Condensed Consolidated Financial Statements Segment
Information
(Unaudited)
(in millions of dollars)
Three Quarterly Periods Ended June 30, 2018
ConsumerPackaging
Health, Hygiene&
Specialties
EngineeredMaterials
Total Net sales
$ 1,816 $
2,009 $ 1,990 $ 5,815
Operating income
$ 151 $ 140 $
276 $ 567 Depreciation and amortization
169 146 82 397 Restructuring and
impairment charges
3 26 4 33 Other
non-cash charges (1)
7 11 9 27 Business
optimization costs (2)
— 6
4 10 Operating EBITDA
$ 330
$ 329 $ 375 $ 1,034
Three Quarterly Periods Ended July 1, 2017
ConsumerPackaging
Health, Hygiene& Specialties
EngineeredMaterials
Total Net sales $ 1,752 $ 1,773 $ 1,689 $ 5,214
Operating income $ 150 $ 164 $ 219 $ 533 Depreciation and
amortization 174 136 73 383 Restructuring and impairment charges 6
8 4 18 Other non-cash charges (1) 8 10 10 28 Business optimization
costs (2) — 10 5 15 Operating EBITDA $ 338 $ 328 $ 311 $ 977
(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)
Quarterly Period Ended
Four QuartersEnded
June 30,2018
July 1,2017
June 30,2018
Net income $ 110 $ 107
$
474 Add: other expense (income), net
3 (1
)
12 Add: interest expense, net
67 68
261 Add:
income tax (benefit) expense
36 38
19 Operating income $
216 $ 212
$ 766 Add: non-cash
amortization from 2006 private sale
7 8
29 Add:
restructuring and impairment
7 8
39 Add: other
non-cash charges (1)
7 7
33 Add: business
optimization and other expenses (2)
8 5
11 Adjusted operating income (9)
$ 245 $ 240
$ 878 Add:
depreciation
96 92
378 Add: amortization of
intangibles (3)
33 32
128 Operating EBITDA (9)
$ 374
$ 364
$ 1,384 Add: acquisitions
(4)
32 Add: unrealized cost savings (5)
33
Adjusted EBITDA (9)
$ 1,449
Cash flow from operating activities
$ 271 $
247
$
951
Net additions to property, plant, and equipment
(86 )
(66 )
(333
) Payment of tax receivable agreement
—
—
(88
) Adjusted free cash flow (9)
$ 185
$ 181
$
530
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
EstimatedFiscal 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180803005041/en/
Berry Global Group, Inc.Dustin Stilwell,
1+812-306-2964ir@berryglobal.com
Berry Global (NYSE:BERY)
Historical Stock Chart
From Mar 2024 to Apr 2024
Berry Global (NYSE:BERY)
Historical Stock Chart
From Apr 2023 to Apr 2024
