Second Quarter
Highlights
- GAAP: Net sales of $3.3 billion; Operating income of $301
million; Earnings per share of $1.42
- Non-GAAP: Operating EBITDA of $541 million; Adjusted earnings
per share of $1.96
- Returned $187 million to shareholders in the quarter ($155
million via share repurchases and $32 million in dividends)
- Fiscal 2023 outlook: Reaffirmed adjusted EPS and free cash flow
ranges
Berry’s Chairman and CEO Tom Salmon said, “Our business
delivered solid second quarter and first half results with adjusted
earnings per share growth of 4% and 7%, respectively. During the
past several quarters, we have seen supply chain constraints
continue to ease, prioritized structural cost improvements and
continued our efforts to pivot our portfolio to high-value growth
products across all of our businesses. Our cost actions include the
rationalizing of 15 facilities across the world, moving business to
more efficient cost facilities, and other labor cost reductions
from improved productivity. These cost savings initiatives are
expected to provide annualized cost savings of $115 million and we
expect to realize $70 million in fiscal 2023. These internal
actions helped to offset a 6% volume decline driven by destocking
and general market softness. We continued our focus on driving
long-term value for our shareholders and repurchased $155 million
of shares, or another 2.1% of shares outstanding, in the second
quarter, while also paying our quarterly dividend. We believe our
shares remain undervalued and our repurchases reflect our
confidence in the outlook of our business, our long-term strategy,
and the strength of our operating model and cash flows.
“We will continue to target key end markets which offer greater
potential for differentiation and long-term growth, such as
healthcare, beauty, and foodservice. Additionally, we will continue
to invest and expand our emerging market exposure while delivering
highly desired innovative and sustainability-focused
customer-linked products. Together, with these growth drivers, we
are making long-lasting structural cost improvements while
advancing our strategic initiatives to exit 2023 a much stronger
and more focused Company.”
Key Financials (1)
March Quarter
March YTD
GAAP results
2023
2022
2023
2022
Net sales
$
3,288
$
3,775
$
6,348
$
7,348
Operating income
301
341
511
570
EPS (diluted)
1.42
1.50
2.27
2.36
March Quarter
Reported
Comparable
March YTD
Reported
Comparable
Adjusted non-GAAP results
2023
2022
Δ%
Δ%
2023
2022
Δ%
Δ%
Net sales
$
3,288
$
3,775
(13
%)
(10
%)
$
6,348
$
7,348
(14
%)
(10
%)
Operating EBITDA
541
555
(3
%)
1
%
984
1,012
(3
%)
2
%
Adjusted EPS (diluted)
1.96
1.93
2
%
4
%
3.26
3.18
3
%
7
%
(1)
Adjusted non-GAAP results exclude items
not considered to be ongoing operations. In addition, comparable
change % excludes the impacts of foreign currency and recent
divestitures. Further details related to non-GAAP measures and
reconciliations can be found under our “Non-GAAP Financial Measures
and Estimates” section or in reconciliation tables in this release.
in millions of USD, except per share data
Financial Results – Second Quarter
2023
Consolidated Overview
The net sales decline is primarily attributed to a 6% volume
decline, decreased selling prices of $143 million due to the
pass-through of lower resin costs, an $80 million unfavorable
impact from foreign currency changes, and prior quarter divestiture
sales of $42 million. The volume decline is primarily attributed to
general market softness and ongoing inventory destocking.
The operating income decrease is primarily attributed to a $35
million unfavorable impact from the volume decline, an $18 million
increase in business integration costs, a $15 million unfavorable
impact from foreign currency changes, and an unfavorable impact
from increased selling, general, and administrative expenses. These
declines are partially offset by a $40 million favorable impact
from price cost spread as a result of cost reduction and improved
product mix.
Consumer Packaging - International
The net sales decline in the Consumer Packaging International
segment is primarily attributed to a $57 million unfavorable impact
from foreign currency changes, a 5% volume decline, and prior
quarter divestiture sales of $42 million, partially offset by
increased selling prices of $76 million primarily due to the
pass-through of European inflation. The volume decline is primarily
attributed to general market softness.
The operating income decrease is primarily attributed to a $10
million unfavorable impact from the volume decline, a $9 million
unfavorable impact from foreign currency changes, a $7 million
unfavorable impact from increased business integration costs, and
increased selling, general, and administrative expenses. These
items are partially offset by a $10 million favorable impact from
price cost spread.
Consumer Packaging - North America
The net sales decline in the Consumer Packaging North America
segment is primarily attributed to decreased selling prices of $80
million and a 3% volume decline. The volume decline is primarily
attributed to general market softness partially offset by growth in
our foodservice market.
The operating income increase is primarily attributed to a $24
million favorable impact from price cost spread, partially offset
by unfavorable impacts from the volume decline, increased business
integration costs, and increased selling, general, and
administrative expenses.
Health, Hygiene, & Specialties
The net sales decline in the Health, Hygiene & Specialties
segment is primarily attributed to a 9% volume decline and
decreased selling prices of $64 million. The volume decline is
primarily attributed to general market softness in our specialties
markets and ongoing inventory destocking.
The operating income decrease is primarily attributed to a $19
million unfavorable impact from price cost spread and a $9 million
unfavorable impact from the volume decline.
Engineered Materials
The net sales decline in the Engineered Materials segment is
primarily attributed to decreased selling prices of $75 million, a
7% volume decline, and a $16 million unfavorable impact from
foreign currency changes. The volume decline is primarily
attributed to general market softness in European industrial
markets and ongoing inventory destocking.
The operating income increase is primarily attributed to a $25
million favorable impact from price cost spread, partially offset
by an $11 million unfavorable impact from the volume decline.
Cash Returns to
Shareholders
Berry generates significant cash flow and is committed to
returning capital to shareholders. This annual cash flow provides
substantial capacity to simultaneously reinvest in the business for
organic growth, pursue bolt-on acquisitions, pay down debt and
return cash to shareholders through a compelling dividend as well
as regular share repurchases. The Company expects to return over
$700 million through share repurchases and dividends in fiscal
2023, subject to market conditions, available cash on hand and cash
needs, overall financial condition, and other factors considered
relevant by our Board of Directors.
Dividend and Share Repurchases
As previously announced, Berry’s Board of Directors declared a
quarterly cash dividend of $0.25 per share payable on June 15, 2023
to stockholders of record as of June 1, 2023. During the second
quarter, Berry repurchased 2.5 million shares (or approximately
2.1% of shares outstanding) for $155 million, leaving over $700
million authorized for share repurchases at the end of the second
fiscal quarter. Through the first two quarters of fiscal 2023, we
have repurchased 5.5 million shares (or approximately 4.4% of
shares outstanding) for $333 million. Berry may repurchase shares
through the open market, privately negotiated transactions or other
programs, subject to market conditions. The Company continues to
expect to repurchase at least $600 million of stock in fiscal 2023,
subject to market conditions, available cash on hand and cash
needs, overall financial condition, and other factors considered
relevant by our Board of Directors.
Fiscal Year 2023 Guidance
(based on information available as of May 4, 2023)
- Adjusted earnings per share range of $7.30 - $7.80
- Cash flow from operations range of $1.4 - $1.5 billion; free
cash flow range of $800 - $900 million
- Anticipate returning at least $700 million of capital to
shareholders through share repurchases and dividends
Investor Conference Call
The Company will host a conference call today, May 4, 2023, at
10 a.m. U.S. Eastern Time to discuss our second fiscal quarter 2023
results. This call will be webcast live on Berry’s website at
https://ir.berryglobal.com/financials. A new, simplified event
registration and access provides two ways to access the call. A
replay of the webcast will be available via the same link on our
website approximately two hours after the completion of the
call.
By Telephone
Participants may register for the call here now or any time up
to and during the time of the call, and will immediately receive
the dial-in number and a unique pin to access the call. While you
may register at any time up to and during the time of the call, you
are encouraged to join the call 10 minutes prior to the start of
the event.
Via the Internet
The conference call and accompanying webcast slides will also be
broadcast live over the internet. To access the event, click on the
following link: https://ir.berryglobal.com/financials. A replay of
the webcast will be available via the same link on our website
approximately two hours after the completion of the call.
About Berry
At Berry Global Group, Inc. (NYSE:BERY), we create packaging and
engineered products that we believe make life better for people and
the planet. We do this every day by leveraging our unmatched global
capabilities, sustainability leadership, and deep innovation
expertise to serve customers of all sizes around the world.
Harnessing the strength in our diversity and industry leading
talent of 46,000 global employees across more than 265 locations,
we partner with customers to develop, design, and manufacture
innovative products with an eye toward the circular economy. For
more information, visit our website, or connect with us on LinkedIn
or Twitter.
Non-GAAP Financial Measures and
Estimates
This press release includes non-GAAP financial measures such as
operating EBITDA, Adjusted EBITDA, Adjusted net income, Adjusted
earnings per share, free cash flow, and comparable basis net sales,
adjusted EPS and operating EBITDA. 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. Information reconciling forward-looking operating
EBITDA is not provided because such information is not available
without unreasonable effort due to the high variability,
complexity, and low visibility with respect to certain items,
including debt refinancing activity or other non-comparable items.
These items are uncertain, depend on various factors, and could be
material to our results computed in accordance with U.S. GAAP.
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” within the meaning of the
federal securities laws 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,” “projects,” “outlook,” “anticipates” or
“looking forward,” or similar expressions that relate to our
strategy, plans, intentions, or expectations. 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, from time to time make forward-looking public
statements concerning our expected future operations and
performance and other developments.
Our actual results may differ materially from those that we
expected due to a variety of factors, including without limitation:
(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 to our customers on a timely basis; (3) risks related to
acquisitions or divestitures and integration of acquired businesses
and their operations, and realization of anticipated cost savings
and synergies; (4) risks related to international business,
including transactional and translational foreign currency exchange
rate risk and the risks of compliance with applicable export
controls, sanctions, anti-corruption laws and regulations; (5)
increases in the cost of compliance with laws and regulations,
including environmental, safety, and climate change laws and
regulations; (6) labor issues, including the potential labor
shortages, shutdowns or strikes, or the failure to renew effective
bargaining agreements; (7) risks related to disruptions in the
overall global economy, persistent inflation, supply chain
disruptions, and the financial markets that may adversely impact
our business, including as a result of the Russia-Ukraine conflict;
(8) risk of catastrophic loss of one of our key manufacturing
facilities, natural disasters, and other unplanned business
interruptions; (9) risks related to weather-related events and
longer-term climate change patterns; (10) risks related to the
failure of, inadequacy of, or attacks on our information technology
systems and infrastructure; (11) risks that our restructuring
programs may entail greater implementation costs or result in lower
cost savings than anticipated; (12) risks related to future
write-offs of substantial goodwill; (13) risks of competition,
including foreign competition, in our existing and future markets;
(14) risks related to market conditions associated with our share
repurchase program; (15) risks related to market disruptions and
increased market volatility as a result of Russia’s invasion of
Ukraine; and (16) the other factors and uncertainties discussed in
the section titled “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. New
factors may emerge from time to time, and it is not possible for us
to predict new factors, nor can we assess the potential effect of
any new factors on us. Accordingly, readers should not place undue
reliance on those statements. All forward-looking statements are
based upon information available to us on the date hereof. All
forward-looking statements are made only as of the date hereof and
we undertake no obligation to 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)
Quarterly Period Ended
Two Quarterly Periods
Ended
April 1, 2023
April 2, 2022
April 1, 2023
April 2, 2022
Net sales
$
3,288
$
3,775
$
6,348
$
7,348
Costs and expenses:
Cost of goods sold
2,682
3,154
5,224
6,192
Selling, general and administrative
220
207
456
442
Amortization of intangibles
60
65
120
133
Restructuring and transaction
activities
25
8
37
11
Operating income
301
341
511
570
Other expense
1
6
2
6
Interest expense, net
79
71
150
142
Income before income taxes
221
264
359
422
Income tax expense
47
59
79
96
Net income
$
174
$
205
$
280
$
326
Basic net income per share
$
1.44
$
1.53
$
2.29
$
2.42
Diluted net income per share
1.42
1.50
2.27
2.36
Outstanding weighted average shares
(in millions)
Basic
120.7
133.8
122.2
134.6
Diluted
122.5
136.9
123.3
138.0
Condensed Consolidated Balance
Sheets (Unaudited)
(in millions of USD)
April 1, 2023
October 1, 2022
Cash and cash equivalents
$
696
$
1,410
Accounts receivable
1,751
1,777
Inventories
1,864
1,802
Other current assets
220
175
Property, plant, and equipment
4,612
4,342
Goodwill, intangible assets, and other
long-term assets
7,470
7,450
Total assets
$
16,613
$
16,956
Current liabilities, excluding current
debt
2,308
2,831
Current and long-term debt
9,307
9,255
Other long-term liabilities
1,703
1,674
Stockholders’ equity
3,295
3,196
Total liabilities and stockholders'
equity
$
16,613
$
16,956
Condensed Consolidated
Statements of Cash Flows (Unaudited)
Two Quarterly Periods
Ended
(in millions of USD)
April 1, 2023
April 2, 2022
Cash flows from operating
activities:
Net income
$
280
$
326
Depreciation
279
284
Amortization of intangibles
120
133
Non-cash interest, net
(27
)
8
Settlement of derivatives
36
-
Deferred income tax
(51
)
(43
)
Share-based compensation expense
30
28
Other non-cash operating activities,
net
8
(14
)
Changes in working capital
(507
)
(736
)
Net cash from operating
activities
168
(14
)
Cash flows from investing
activities:
Additions to property, plant, and
equipment, net
(385
)
(367
)
Acquisition of business and other
(88
)
3
Net cash from investing
activities
(473
)
(364
)
Cash flows from financing
activities:
Repayments on long-term borrowings
(583
)
(9
)
Proceeds from long-term borrowings
500
244
Repurchase of common stock
(333
)
(351
)
Proceeds from issuance of common stock
18
22
Dividends paid
(65
)
-
Other, net
11
-
Net cash from financing
activities
(452
)
(94
)
Effect of currency translation on cash
43
3
Net change in cash and cash
equivalents
(714
)
(469
)
Cash and cash equivalents at beginning of
period
1,410
1,091
Cash and cash equivalents at end of
period
$
696
$
622
Non-U.S. GAAP Free Cash Flow:
Cash flow from operating activities
$
168
$
(14
)
Additions to property, plant, and
equipment (net)
(385
)
(367
)
Non-U.S. GAAP Free Cash Flow
$
(217
)
$
(381
)
Segment and Supplemental
Comparable Basis Information (Unaudited)
Quarterly Period Ended April
1, 2023
(in millions of USD)
Consumer Packaging -
International
Consumer Packaging- North
America
Health, Hygiene &
Specialties
Engineered Materials
Total
Net sales
$
1,059
$
774
$
677
$
778
$
3,288
Operating income
$
75
$
93
$
34
$
99
$
301
Depreciation and amortization
77
54
44
25
200
Restructuring and transaction
activities
12
7
5
1
25
Other non-cash charges
10
2
1
2
15
Operating EBITDA
$
174
$
156
$
84
$
127
$
541
Quarterly Period Ended April 2,
2022
Reported net sales
$
1,139
$
880
$
822
$
934
$
3,775
Foreign currency and divestitures
(99
)
—
(7
)
(16
)
(122
)
Comparable net sales (1)
$
1,040
$
880
$
815
$
918
$
3,653
Operating income
$
97
$
85
$
69
$
90
$
341
Depreciation and amortization
82
53
44
27
206
Restructuring and transaction
activities
5
2
—
1
8
Other non-cash charges
(4
)
2
1
1
—
Foreign currency and divestitures
(15
)
—
(4
)
(2
)
(21
)
Comparable operating EBITDA (1)
$
165
$
142
$
110
$
117
$
534
(1)
The prior year comparable basis change
excludes the impacts of foreign currency and recent divestitures.
Further details related to non-GAAP measures and reconciliations
can be found under our “Non-GAAP Financial Measures and Estimates”
section or in reconciliation tables in this release.
Reconciliation of Non-GAAP
Measures
Reconciliation of adjusted earnings before interest, tax,
depreciation and amortization (EBITDA), Net income, and earnings
per share (EPS)
(in millions of USD, except per share data
amounts)
Quarterly Period Ended
Two Quarterly Periods
Ended
April 1,
2023
April 2,
2022
April 1,
2023
April 2,
2022
Net income
$
174
$
205
$
280
$
326
Add: other expense
1
6
2
6
Add: interest expense
79
71
150
142
Add: income tax expense
47
59
79
96
Operating income
$
301
$
341
$
511
$
570
Add: restructuring and transaction
activities
25
8
37
11
Add: other non-cash charges
15
—
37
14
Adjusted operating income (2)
$
341
$
349
$
585
$
595
Add: depreciation
140
141
279
284
Add: amortization of intangibles
60
65
120
133
Operating EBITDA (2)
$
541
$
555
$
984
$
1,012
Net income per diluted share
$
1.42
$
1.50
$
2.27
$
2.37
Other expense, net
0.01
0.04
0.02
0.04
Restructuring and transaction
activities
0.20
0.06
0.29
0.08
Amortization of intangibles from
acquisitions (1)
0.49
0.47
0.97
0.96
Income tax impact on items above
(0.16
)
(0.14
)
(0.29
)
(0.27
)
Foreign currency and divestitures
(0.05
)
(0.13
)
Adjusted net income per diluted
share (2)
$
1.96
$
1.88
$
3.26
$
3.05
Estimated
Fiscal 2023
Cash flow from operating activities
$1,400-$1,500
Net additions to property, plant, and
equipment
(600)
Free cash flow (2)
$800-$900
(1)
Amortization of intangibles from
acquisition are added back to better align our calculation of
adjusted EPS with peers.
(2)
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. Organic sales growth and comparable basis measures exclude
the impact of currency translation effects and acquisitions. These
non-GAAP financial measures may be calculated differently by other
companies, including other companies in our industry, limiting
their usefulness as comparative measures. Berry’s management
believes that adjusted net income and other non-GAAP financial
measures are useful to our investors because they allow for a
better period-over-period comparison of operating results by
removing the impact of items that, in management’s view, do not
reflect our core operating performance.
We define “free cash flow” as cash flow
from operating activities, less net additions to property, plant,
and equipment. We believe free cash flow is useful to an investor
in evaluating our liquidity because 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 free 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,
Operating EBITDA, and comparable basis measures, among other
measures, to evaluate management performance and in determining
performance-based compensation. Operating EBITDA is a measure
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.
(BERY-F)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230504005203/en/
Company Contact Information Dustin Stilwell VP, Investor
Relations +1 (812) 306 2964 ir@berryglobal.com
Berry Global (NYSE:BERY)
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