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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM 8-K

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BERRY GLOBAL GROUP, INC.

(Exact name of registrant as specified in charter)

101 Oakley Street

Evansville, Indiana 47710

 (Address of principal executive offices / Zip Code)

 

(812) 424-2904

(Registrant's telephone number, including area code)

 

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Berry Global Group, Inc. Reports Fourth Quarter and Fiscal Year 2018 Results;

 Provides 2019 Fiscal Year Guidance

 

 

Commenting on the quarter, Tom Salmon, Chairman and Chief Executive Officer of Berry stated, "Net sales increased 9 percent to $2.1 billion, compared to the prior year quarter.  Additionally, we generated  quarterly and annual records for free cash flow of $382 million and $634 million, respectively."

"Specifically by segment, our Consumer Packaging division delivered strong organic sales growth of 8 percent in the quarter, which was led by our foodservice products.  These results were driven by stronger demand at quick service restaurants and convenience stores along with stronger overall end market demand for certain products.  Within our Health, Hygiene & Specialties division we recorded strong quarterly sales growth of 21 percent as well as a 16 percent improvement in Operating EBITDA, including the impact of the recently completed acquisition of Clopay.  Inside our Engineered Materials division, we successfully completed the acquisition of Laddawn, which enhances our ability to service the faster growing small and medium size customer base."

Mr. Salmon continued, "As we disclosed last quarter, our Board of Directors approved a new $500 million share repurchase program.  In our fiscal 2019 first quarter, we expect to continue to execute on our share repurchase plan given the current attractive market conditions and valuation."

The net sales increase of $173 million from the prior year quarter was primarily attributed to acquisition net sales of 7 percent and organic sales growth of 3 percent partially offset by a small negative impact from foreign currency changes.

 

The net sales growth of $774 million is primarily attributed to acquisition net sales of $624 million, organic sales growth of $92 million, and a $58 million favorable impact from foreign currency changes.  The organic sales growth is primarily attributed to increased selling prices of $191 million due to the pass through of higher cost of goods sold, partially offset by a modest 1% volume decline.

 

The operating income increase of $29 million is primarily attributed to acquisition operating income of $62 million, a $46 million decrease in selling, general and administrative expense related to synergies and lower incentive compensation; a $26 million decrease in depreciation and amortization, and an $11 million favorable impact from foreign currency changes. These improvements were partially offset by a $96 million negative impact from under recovery of higher cost of goods sold, and a $12 million impact from the lower volumes.

Net sales in the Engineered Materials segment grew by $297 million primarily attributed to acquisition net sales of $319 million, partially offset by an organic sales decline of $29 million. The organic sales decline is primarily related to increased selling prices of $54 million, being more than offset by a 3% volume decline as a result of business rationalizations within legacy AEP locations.

 

The operating income increase of $52 million is primarily attributed to acquisition operating income of $40 million, an $18 million decrease in depreciation and amortization expense, and an $8 million decrease in selling, general and administrative expenses.  These improvements were partially offset by an $11 million negative impact from the lower volumes.

Net sales in the Health, Hygiene & Specialties segment grew by $365 million primarily attributed to acquisition net sales of $305 million, a $52 million favorable impact from foreign currency changes, and organic sales growth of $9 million. The organic sales growth is primarily attributed to increased selling prices of $56 million due to the pass through of higher cost of goods sold, partially offset by a 2% volume decline.

The operating income decrease of $14 million is primarily attributed to a $53 million negative impact from under recovery of higher cost of goods sold, a $7 million impact from lower volumes, and a $12 million increase in business integration.  These decreases were partially offset by a $22 million decrease in selling, general and administrative expenses, acquisition operating income of $22 million from the Clopay acquisition, and a $10 million favorable impact from foreign currency changes.

Net sales in the Consumer Packaging segment grew by $112 million primarily attributed to organic sales growth.  The organic sales growth is primarily attributed to increased selling prices of $81 million due to the pass through of higher cost of goods sold and a 1% volume improvement.

 

The operating income decrease of $9 million is primarily attributed to a $40 million negative impact from under recovery of higher cost of goods sold, partially offset by a $16 million decrease in selling, general and administrative expenses, a $6 million favorable impact from the volume improvement, and a $6 million decrease in business integration expense.

Our cash flow from operating activities was $448 million for the September 2018 quarter and $1,004 million for fiscal year 2018.  The Company's adjusted free cash flow for the September 2018 quarter was $382 million, a 37 percent increase compared to the prior year quarter of $278 million.  The Company's adjusted free cash flow for fiscal year 2018 was a fiscal year record of $634 million.

Our total debt less cash and cash equivalents at the end of the September 2018 quarter was $5,463 million.  Adjusted EBITDA for the four quarters ended September 29, 2018 was $1,449 million.

In the June 2018 quarter, the Company announced that its Board had 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 and amount of repurchases will depend on market conditions.  The share repurchase program has no expiration date.  The Company repurchased $35 million of shares outstanding during the September 2018 quarter.  In our fiscal 2019 first quarter, we expect to continue to execute on our share repurchase plan given attractive market conditions and compelling valuations.

We anticipate our fiscal year 2019 cash flow from operations and adjusted free cash flow to be $1.04 billion and $670 million, respectively.  Our estimate assumes constant currency rates from the end of fiscal 2018 and a normal inflationary environment on our costs.  Additionally, our fiscal 2019 capital spending and cash interest costs are forecasted to be $350 million and $270 million, respectively.  Within our adjusted free cash flow guidance, we are also assuming cash taxes to be $165 million in fiscal 2019, including a $16 million payment in the first fiscal quarter under the Company's tax receivable agreement, along with working capital and other cash uses of $45 million.

The Company will host a conference call today, November 15, 2018, at 10 a.m. Eastern Time to discuss its fourth quarter and fiscal year 2018 results.  The telephone number to access the conference call is (800) 305-1078 (domestic), or (703) 639-1173 (international), conference ID 2388109.  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 15, 2018, at 1 p.m. Eastern Time, to December 6, 2018, by calling (855) 859-2056 (domestic), or (404) 537-3406 (international), access code 2388109.

This press release includes non-GAAP financial measures such as operating EBITDA, adjusted EBITDA, adjusted net income, adjusted free cash flow, and organic sales growth.  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.

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

(Unaudited)

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

 

Consolidated Statements of Comprehensive Income

(Unaudited)
(in millions of dollars) 

Berry Global Group, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

 (in millions of dollars)

Current and Long-Term Debt

Berry Global Group, Inc.

   Condensed Consolidated Statements of Cash Flows

(Unaudited)

 (in millions of dollars)

Berry Global Group, Inc.

Condensed Consolidated Financial Statements

Segment Information

(Unaudited)

(in millions of dollars)

 

 

Berry Global Group, Inc.

Condensed Consolidated Financial Statements

Segment Information

(Unaudited)

(in millions of dollars)

 

Berry Global Group, Inc.

Reconciliation Schedules

(Unaudited)

(in millions of dollars, except per share data)

 

 

 

 

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.

 

Berry Global Group, Inc.

Reconciliation Schedules

(Unaudited)

Organic sales growth = volume + price/mix

 

Company Contact:

Dustin Stilwell

1+812.306.2964

IR@BerryGlobal.com

 

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