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Berry Global Group, Inc. Reports Fourth Quarter and Fiscal Year 2018 Results; Provides 2019 Fiscal Year Guidance

November 15, 2018

EVANSVILLE, Ind.--(BUSINESS WIRE)--Nov 15, 2018--Berry Global Group, Inc. (NYSE:BERY) today reported its fourth quarter and fiscal year 2018 results, referred to in the following as the September 2018 quarter and fiscal year 2018.

Fourth Quarter Highlights (all comparisons made to the September 2017 quarter)

Net sales increased 9 percent to $2.1 billion Organic sales growth, excluding currency and acquisition effects, up 3 percent Operating income down 3 percent to $194 million Operating EBITDA down 1 percent to $346 million Net income per diluted share up 22 percent to $0.99 Adjusted net income per diluted share up 3 percent to $0.90 Cash flow from operations increased by 13 percent to $448 million Adjusted free cash flow increased by 37 percent to $382 million Completed the strategic acquisition of Laddawn, Inc.

Fiscal Year Highlights (all comparisons made to fiscal year 2017)

Net sales increased 11 percent to an annual record of $7.9 billion Organic sales, excluding currency and acquisition effects, increased 1 percent Operating income up 4 percent to $761 million Operating EBITDA up 4 percent to $1,380 million Net income per diluted share up 43 percent to $3.67 Adjusted net income per diluted share up 10 percent to $3.37 Cash flow from operations increased by 3 percent to $1,004 million Adjusted free cash flow increased by 5 percent to $634 million Expect fiscal year 2019 cash flow from operations of $1.04 billion and adjusted free cash flow of $670 million

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.”

September 2018 Quarter Results

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 operating income decrease of $5 million from the prior year quarter was primarily attributed to a $33 million negative impact from under recovery of higher cost of goods sold partially offset by a $10 million decrease in selling, general, and administrative expense, due to synergies and cost reductions; and acquisition operating income of $8 million, a $7 million decrease in depreciation and amortization expense, and a $5 million decrease in business integration expenses.

Fiscal Year 2018 Results

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.

Cash Flow and Capital Structure

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.

Share Repurchase Program

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.

Outlook

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.

Investor Conference Call

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.

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 $7.9 billion of sales in fiscal 2018. 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 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.

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 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.

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