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News Release

 

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Berry Global Group, Inc. Reports Fourth Quarter and Fiscal Year 2017 Results

EVANSVILLE, Ind. – November 16, 2017 – Berry Global Group, Inc. (NYSE:BERY) today reported results for its fourth quarter and fiscal year 2017, referred to in the following as the September 2017 quarter and fiscal year 2017.

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Net income for the September 2017 quarter was $110 million ($0.81 per diluted share) compared to $77 million ($0.61 per diluted share) in the prior year quarter.  Adjusted net income per diluted share in the September 2017 quarter was 19 percent higher at $0.87 compared to $0.73 in the prior year quarter.

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Net sales increased 16 percent over the prior year quarter to $1.9 billion.  Operating income for the quarter increased by 32 percent to $199 million compared to $151 million in the prior year quarter.  Operating EBITDA was $350 million (18.6 percent of net sales), an increase of 16 percent compared to the September 2016 quarter.

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Fiscal year 2017 net sales increased 9 percent over the prior fiscal year to $7.1 billion compared to $6.5 billion.  Operating income for fiscal year 2017 increased by 26 percent to $732 million compared to $581 million in the prior fiscal year.  Operating EBITDA was a fiscal year record at $1.33 billion (18.7 percent of net sales), an increase of 10 percent compared to $1.21 billion (18.6 percent of net sales) in fiscal year 2016.

●	Cash flow from operations for fiscal 2017 was $975 million, and adjusted free cash flow for fiscal 2017 was a fiscal year record at $601 million.

●	Expected fiscal year 2018 cash flow from operations of $965 million and adjusted free cash flow of $610 million.

"Berry had a solid fourth quarter and full fiscal year as we exceeded our guidance for adjusted free cash flow by $51 million.  We achieved fiscal year records for net sales, operating EBITDA and adjusted free cash flow.  During the year we met our top priority by reducing our leverage ratio to below 4, ending the fiscal year at 3.8 times net debt to adjusted EBITDA, the lowest in the Company's history as a public company," said Tom Salmon, CEO of Berry.

The net sales increase of $263 million from the prior year quarter is primarily attributed to acquisition net sales of $288 million, selling price increases of $9 million due to the pass through of higher resin prices, and an $11 million positive impact from foreign currency changes partially offset by a 2 percent base volume decline.  The base volume decline in the quarter is primarily attributed to our decisions to rationalize certain lower margin products that we acquired from AEP in order to maximize earnings.

 

The operating income increase of $48 million from the prior year quarter is primarily attributed to acquisition operating income of $20 million, an $18 million improvement in our product mix and price/cost spread, $6 million decrease in SG&A and operating expenses, and a $4 million positive impact from currency translation.  These improvements were partially offset a negative $4 million impact from base volume declines.

The net sales increase of $606 million is primarily attributed to acquisition net sales of $788 million and selling price increases of $60 million due to the pass through of higher resin prices, partially offset by a negative $136 million impact from a 2 percent base volume decline, $98 million from extra days in fiscal 2016, and a slightly negative impact from foreign currency changes.

 

The operating income increase of $151 million is primarily attributed to acquisition operating income of $62 million, a $36 million decrease in Avintiv integration and restructuring costs, a $35 million decrease in selling, general and administrative expense related to synergies and cost reductions, a $24 million improvement in our product mix and price/cost spread, a $16 million decrease in depreciation and amortization, and a slight improvement in productivity in manufacturing.  These improvements were partially offset by a $20 million impact from the base volume decline and $10 million from extra days in fiscal 2016.

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

Engineered Materials' net sales increased by $748 million primarily attributed to acquisition net sales of $788 million, and selling price increases of $67 million due to the pass through of higher resin prices, partially offset by a negative $79 million impact from a 3 percent base volume decline, and $30 million from extra days in fiscal 2016.  The base volume decline is primarily attributed to our decisions to rationalize certain lower margin products that we acquired from AEP in order to maximize earnings.

 

The operating income increase of $134 million is primarily attributed to acquisition operating income of $62 million, a $71 million improvement in our product mix and price/cost spread, a $13 million decrease in selling, general and administrative expenses, a $3 million decrease in business integration and restructuring costs, and a slight improvement in productivity in manufacturing, partially offset by a negative $8 million impact from lower base volumes, a $6 million increase in depreciation and amortization expense, and $4 million from extra days in fiscal 2016.

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Health, Hygiene, and Specialties' net sales decreased by $31 million primarily attributed to extra days in fiscal 2016 of $25 million, selling price decreases of $23 million, and a slightly unfavorable impact from foreign currency, partially offset by a $26 million positive impact from base volume improvements.

The operating income increase of $21 million is primarily attributed to a $27 million decrease in business integration and restructuring costs associated with the Avintiv acquisition, a $13 million improvement in productivity in manufacturing, a $12 million decrease in depreciation and amortization expense, a $5 million impact from base volumes, and a $5 million decrease in selling, general and administrative expenses. These improvements were partially offset by a $45 million decrease in our product mix and price/cost spread primarily related to inflation and market pressures within our South American business.

Consumer Packaging's net sales decreased by $111 million primarily attributed to an $83 million negative impact from base volumes and $43 million from extra days in fiscal 2016, partially offset by selling price increases of $15 million due to the pass through of higher resin prices.  The volume decline was primarily attributed to general market softness and our continued focus on volume, price, and mix in order to optimize earnings.

 

The operating income decrease of $3 million is primarily attributed to a base volume decline of $17 million, an $11 million negative impact from productivity in manufacturing, $5 million from extra days in fiscal 2016, and a slight decrease in our product mix and price/cost spread, partially offset by a $17 million decrease in selling, general and administrative expenses related to synergies from cost reductions, a $10 million decrease in depreciation and amortization expense, and a $5 million decrease in business integration and restructuring expense.

Our cash flow from operating activities was $395 million for the September 2017 quarter and $975 million for fiscal year 2017.  The Company's adjusted free cash flow for the September 2017 quarter was $278 million, a 20 percent increase compared to the prior year quarter of $231 million.  The Company's adjusted free cash flow for fiscal year 2017 was a fiscal year record of $601 million, a 16 percent increase, compared to $517 million in fiscal year 2016.

Our total debt less cash and cash equivalents at the end of the September 2017 quarter was $5,335 million.  Adjusted EBITDA for the four quarters ended September 30, 2017 was $1,405 million.

Earlier today, November 16, 2017, the Company announced we had entered into a definitive agreement to acquire the Clopay Plastic Products Company, Inc.("Clopay"), a subsidiary of Griffon Corporation for $475 million in cash, which is preliminary and subject to adjustment.  Clopay, is a global supplier of printed breathable films as wells as a key innovator in the customer development of elastic films and laminates with product offerings uniquely designed for applications used in a number of markets including: hygiene, healthcare, building and construction and industrial protective apparel.  Clopay has nearly 1,500 employees with an expanded footprint serving markets across the globe including 7 manufacturing facilities located in the United States, Germany, Brazil, and China.  Clopay's most recent fiscal year ended in September 2017 delivered $461 million in net sales and $53 million in operating EBITDA.  The completion of the Clopay acquisition is subject to customary closing conditions and the terms and conditions of the purchase agreement.  Further, we estimate we will achieve annual cost synergies of approximately $20 million, which should be realized over the next 2 years.  The purchase price, including our expected cost synergies along with the tax basis step-up value, represents an adjusted EBITDA multiple of below 6 times.

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We anticipate our fiscal year 2018 cash flow from operations and adjusted free cash flow to be $965 million and $610 million, respectively.  Our estimate assumes flat working capital and volumes.  Additionally, our capital spending and cash interest costs are forecasted to be $320 million and $250 million, respectively.  Within our adjusted free cash flow guidance, we are also assuming cash taxes to be $210 million, including a $35 million payment in the first quarter under the Company's tax receivable agreement, along with other cash uses of $40 million related to items such as acquisition integration expenses and costs to achieve synergies.  These estimates and assumptions do not include our most recent definitive agreement to acquire Clopay.

The Company will host a conference call today, November 16, 2017, at 10 a.m. Eastern Time to discuss its fourth quarter and fiscal year 2017 results.  The telephone number to access the conference call is (800) 305-1078 (domestic), or (703) 639-1173 (international), conference ID 98750799.  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 November 16, 2017, at 1 p.m. Eastern Time, to December 4, 2017, by calling (855) 859-2056 (domestic), or (404) 537-3406 (international), access code 98750799.

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.

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Berry Global Group, Inc.

Consolidated Statements of Income

(Unaudited)

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

 

Berry Global Group, Inc.

Consolidated Statements of Comprehensive Income

(Unaudited)
(in millions of dollars) 

 

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Berry Global Group, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

 (in millions of dollars)

Current and Long-Term Debt

 

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Berry Global Group, Inc.

   Condensed Consolidated Statements of Cash Flows

(Unaudited)

 (in millions of dollars)

 

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Berry Global Group

Condensed Consolidated Financial Statements

Segment Information

(Unaudited)

(in millions of dollars)

⁽¹⁾ Other non-cash charges in the September 2017 quarter pimarily includes $4 million of stock compensation expense.  Other non-cash charges in the September 2016 quarter primarily includes $3 million of stock compensation expense along with other non-cash charges.

⁽²⁾ Includes integration expenses and other business optimization costs.

 

 

Berry Global Group, Inc.

Condensed Consolidated Financial Statements

Segment Information

 (Unaudited)

(in millions of dollars)

⁽¹⁾ Other non-cash charges for the fiscal year ended September 30, 2017 primarily include $20 million of stock compensation expense, $5 million step up of inventory to fair value related to the AEP acquisition, along with other non-cash charges.  Other non-cash charges for the fiscal year ended October 1, 2016 primarily includes $20 million of stock compensation expense, $7 million step-up of inventory to fair value related to the Avintiv acquisition and other non-cash charges.

⁽²⁾ Includes integration expenses and other business optimization costs.

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Berry Global Group, Inc.

Reconciliation Schedules

(Unaudited)

(in millions of dollars, except per share data)

 

 

		Estimated Fiscal 2018
Cash flow from operating activities		$	965
Additions to property, plant, and equipment			(320	)
Tax receivable agreement payment (8)			(35	)
Adjusted free cash flow (9)		$	610
Interest expense			255
Additions to property, plant, and equipment			(5	)
Cash interest expense (9)		$	250

 

 

Clopay Reconciliation Schedule

(Unaudited)

⁽¹⁾ Other non-cash charges in the September 2017 quarter primarily include $4 million of stock compensation expense and other non-cash charges.  The September 2016 quarter primarily includes $3 million of stock compensation expense and other non-cash charges.  For the fiscal year ended September 2017 other non-cash charges primarily include $20 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.  Other non-cash charges for the fiscal year ended October 1, 2016 primarily includes $20 million of stock compensation expense, $7 million step-up of inventory to fair value related to the Avintiv 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 September 30, 2017 and October 1, 2016 quarters and $32 million for the both the four quarters ended September 30, 2017 and October 1, 2016.

⁽⁴⁾ Represents Operating EBITDA for the AEP acquisition for the period of October 2016 to January 19, 2017 and the Adchem acquisition for the period of October 2016 to June 2017.

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

⁽⁶⁾ Other non-cash charges excludes $4 million and $20 million of stock compensation expense for the quarter ended September 30, 2017 and fiscal year end 2017, respectively.  Prior year quarter and fiscal year impact on adjusted net income per share would be $0.02 and $0.11, respectively.

⁽⁷⁾ Income tax effects on adjusted net income were calculated using 32% for both the September 2017 and 2016 quarters and fiscal years.  The rates used for each represents the Company's expected effective tax rate for each respective period.

⁽⁸⁾ Includes $35 million tax receivable agreement payment to be made in our first fiscal quarter in 2018.

⁽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.

Our projected adjusted free cash flow for fiscal 2018 assumes $965 million of cash flow from operations less $320 million of net additions to property, plant, and equipment and $35 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 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.  The Clopay reconciliation schedule for segment operating EBITDA, is not a measure determined in accordance with accounting principles generally accepted in the United States of America (GAAP). For further information regarding Clopay's results, including a reconciliation of non-GAAP financial measures to comparable GAAP measures, see the earnings release of Griffin Corporation issued earlier today.  As used herein, Clopay's operating EBITDA refers to the same measure defined in Griffin Corporation's earnings release as Clopay's "Segment operating EBITDA." Non-GAAP measures should be viewed as supplements to, rather than substitutes for comparable measures under GAAP.

Company Contact:

Dustin Stilwell

1+812.306.2964

ir@berryglobal.com

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