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

EVANSVILLE, Ind.–(BUSINESS WIRE)–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.

• 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.
• 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.
• 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.

September 2017 Quarter Results

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.

Fiscal Year 2017 Results

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.

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.

Cash Flow and Capital Structure

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.

Recent Development

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.

Outlook

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.

Investor Conference Call

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.

About Berry

Berry 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 customized protection solutions. The Company’s products
include engineered materials, non-woven specialty materials, and
consumer packaging. Berry’s world headquarters is located in Evansville,
Indiana. With net sales of $7.1 billion in fiscal 2017, Berry, a Fortune
500 company, is listed on the New York Stock Exchange under the ticker
symbol BERY. 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. Our “leverage
ratio” means the ratio of (i) our total debt minus our cash and cash
equivalents to (ii) our Adjusted EBITDA.

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) the risk that the conditions to closing of
the Clopay acquisition may not be satisfied; and (14) 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.

Contacts

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

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