Berry Plastics Group, Inc. Reports Third Quarter Fiscal 2014 Results

EVANSVILLE, Ind.--()--Berry Plastics Group, Inc. (NYSE:BERY) today reported results for its third quarter fiscal 2014, referred to in the following as the June 2014 quarter:

  • Increased net sales by 6 percent to $1,298 million for the June 2014 quarter compared to $1,221 million in the June 2013 quarter
  • Achieved Operating EBITDA of $212 million for the June 2014 quarter and LTM Adjusted EBITDA of $835 million
  • Increased cash from operating activities for the three fiscal quarters ended June 2014 to $370 million from $297 million in the prior year three fiscal quarters
  • LTM Adjusted free cash flow of $291 million, representing a 10 percent adjusted free cash flow yield
  • Recorded net income of $15 million ($0.12 per diluted share) for the June 2014 quarter versus $40 million ($0.33 per diluted share) for the June 2013 quarter
  • Adjusted net income per diluted share of $0.51 for the June 2014 quarter compared to $0.35 in the June 2013 quarter

“In the June 2014 quarter we reported record sales for any quarterly period in the Company’s history, in the face of weak packaged food demand,” said Jon Rich, Chairman and CEO of Berry Plastics. “We also matched our Operating EBITDA record for any quarterly period of $212 million.”

June 2014 Quarter Results
For the June 2014 quarter, the Company’s net sales increased by 6 percent to $1,298 million from $1,221 million in the June 2013 quarter. The year-over-year increase was primarily attributed to increased selling prices due to higher material costs along with sales from businesses we acquired in the last 12 months.

        Quarterly Period Ended (Unaudited)
Net sales (in millions) June 28, 2014     June 29, 2013    

$ Change

    % Change
Rigid Open Top $ 303     $ 312     $ (9 )     (3 )%
Rigid Closed Top   381       370       11       3 %
Rigid Packaging. 684 682 2 - %
Engineered Materials 371 351 20 6 %
Flexible Packaging   243       188       55       29 %
Total net sales $ 1,298     $ 1,221     $ 77       6 %
 

June 2014 Fiscal YTD Results
For June 2014 Fiscal YTD, the Company’s net sales increased by 6 percent to $3,648 million as compared to $3,443 million for the same period of fiscal 2013. The increase was primarily attributed to increased selling prices due to higher material costs along with sales from businesses we acquired in the last 12 months.

        Three Quarterly Periods Ended (Unaudited)
Net sales (in millions) June 28, 2014     June 29, 2013    

$ Change

    % Change
Rigid Open Top $ 820     $ 828     $ (8 )     (1 )%
Rigid Closed Top   1,073       1,036       37       4 %

Rigid Packaging

1,893 1,864 29 2 %
Engineered Materials 1,081 1,030 51 5 %
Flexible Packaging   674       549       125       23 %
Total net sales $ 3,648     $ 3,443     $ 205       6 %
 

Capital Structure and Adjusted Free Cash Flow
At the close of the June 2014 quarter, the ratio of net debt of $3,910 million to LTM Adjusted EBITDA of $835 million was 4.7x. The Company’s LTM Adjusted free cash flow was $291 million.

       

June 28,
2014

   

September 28,
2013

(in millions) (Unaudited)
 
Term Loans $ 2,511 $ 2,522
Revolving line of credit 39
5½% Second Priority Notes 500
9¾% Second Priority Notes 800 800
Retired debt 518
Debt discount, net (20 ) (8 )
Capital leases and other   125     114  
Total debt $ 3,955 $ 3,946
Less: Cash and cash equivalents   (45 )   (142 )
Net debt $ 3,910   $ 3,804  
 

Outlook
“We are reconfirming our guidance of $270 million of adjusted free cash flow for fiscal 2014 and anticipate our September 2014 quarter Operating EBITDA to exceed the prior year quarter by more than 10 percent and exceed our previous record for any quarterly period. We expect to achieve these results based on our assumption that demand will remain similar to the June ending quarter, which is consistent with what we have experienced thus far in the quarter. Recent acquisitions, our restructuring actions, the non resin related price increases we implemented, and our ongoing cost savings plans are all currently expected to have a positive impact on our financial results in the September 2014 quarter,” said Rich.

Investor Conference Call
The Company will host a conference call today, August 1, 2014, at 10 a.m. Eastern Time to discuss its third quarter fiscal 2014 results. The telephone number to access the conference call is (866) 244-4530 (domestic), or (703) 639-1173 (international), conference ID 1639865. The call will last approximately one hour. Interested parties are invited to listen to a live webcast by visiting the Company’s Investor Relations page at www.berryplastics.com. A replay of the conference call can also be accessed on the Investor Relations page of the website beginning August 1, 2014, at 2 p.m. Eastern Time, to August 9, 2014, by calling (888) 266-2081 (domestic), or (703) 925-2533 (international), access code 1639865.

About Berry Plastics
Berry Plastics Group, Inc. is a leading provider of value-added plastic consumer packaging and engineered materials delivering high-quality customized solutions to our customers with annual net sales of over $4.6 billion in fiscal 2013. With world headquarters in Evansville, Indiana, the Company’s common stock is listed on the New York Stock Exchange under the ticker symbol BERY. For additional information, visit the Company’s website at www.berryplastics.com.

Non-GAAP Financial Measures
This press release includes non-GAAP financial measures such as Operating EBITDA, Adjusted EBITDA, Adjusted net income per share and Adjusted free cash flow. 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, 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) performance of our business and future operating results; (4) risks related to our acquisition strategy and integration of acquired businesses; (5) reliance on unpatented know-how and trade secrets; (6) increases in the cost of compliance with laws and regulations, including environmental, safety, and production and product laws and regulations; (7) risks related to disruptions in the overall economy and the financial markets may adversely impact our business; (8) catastrophic loss of one of our key manufacturing facilities, natural disasters, and other unplanned business interruptions; (9) risks of competition, including foreign competition, in our existing and future markets;(10) general business and economic conditions, particularly an economic downturn; (11) the ability of our insurance to cover fully our potential exposures; (12) risks that our restructuring programs may entail greater implementation costs or result in lower costs savings than anticipated, and (13) 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.

 
 

Berry Plastics Group, Inc.

Consolidated Statements of Operations

(Unaudited)

(in millions, except per share data)

           
Quarterly Period Ended Three Quarterly Periods Ended

June 28,
2014

 

June 29,
2013

June 28,
2014

 

June 29,
2013

 
Net sales $ 1,298 $ 1,221 $ 3,648 $ 3,443
Costs and expenses:
Cost of goods sold 1,089 998 3,076 2,829
Selling, general and administrative 85 78 244 230
Amortization of intangibles 26 27 77 81
Restructuring and impairment charges   15     1     28     7  
Operating income 83 117 223 296
 
Debt extinguishment 33 35 64
Other income, net (2 ) (2 ) (3 ) (6 )
Interest expense, net   56     57     168     188  
Income (loss) before income taxes (4 ) 62 23 50
Income tax expense (benefit)   (19 )   22     (10 )   19  
Consolidated net income 15 40 33 31
Net income attributable to noncontrolling interests                
Net income attributable to the Company $ 15   $ 40   $ 33   $ 31  
 
 

Comprehensive income

$ 12 $ 45 $ 28 $ 34
 
 
Net income per share:
Basic $ 0.13 $ 0.35 $ 0.28 $ 0.27
Diluted 0.12 0.33 0.27 0.26
 
Weighted-average number of shares outstanding: (in thousands)
Basic 117,304 114,132 116,609 112,839
Diluted 121,477 120,551 120,812 118,708
 
           

Berry Plastics Group, Inc.

Condensed Consolidated Balance Sheets

(in millions)

 

June 28,
2014

September 28,
2013

(Unaudited)
Assets:
Cash and cash equivalents $ 45 $ 142
Accounts receivable, net 523 449
Inventories 665 575
Other current assets 275 171
Property, plant and equipment, net 1,406 1,266
Goodwill, intangibles assets and other long-term assets   2,505     2,532  
Total assets $ 5,419   $ 5,135  
 
Liabilities and stockholders' deficit
Current liabilities, excluding debt 798 613
Current and long-term debt 3,955 3,946
Other long-term liabilities 784 772
Non-controlling interest 12
Stockholders’ deficit   (130 )   (196 )
Total liabilities and stockholders' deficit $ 5,419   $ 5,135  
 
       

Berry Plastics Group, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in millions)

 
Three Quarterly Periods Ended

June 28,
2014

 

June 29,
2013

 
Net cash from operating activities $ 370 $ 297
 
Cash flows from investing activities:
Additions to property, plant and equipment (172 ) (179 )
Proceeds from sale of assets 5 5
Acquisitions of businesses, net of cash acquired   (225 )   (24 )
Net cash from investing activities (392 ) (198 )
 
Cash flows from financing activities:
Proceeds from long-term borrowings 1,664 1,391
Repayment of long-term borrowings (1,675 ) (1,968 )
Repayment of note receivable 2
Proceeds from issuance of common stock 13 21
Debt financing costs (44 ) (39 )
Payment of tax receivable agreement (32 ) (5 )
Proceeds from initial public offering       438  
Net cash from financing activities   (74 )   (160 )
Effect of exchange rate changes on cash (1 ) (1 )
Net change in cash and cash equivalents (97 ) (62 )
Cash and cash equivalents at beginning of period   142     87  
Cash and cash equivalents at end of period $ 45   $ 25  
 
 

Berry Plastics Group, Inc.

Condensed Consolidated Financial Statements

Segment Information

(Unaudited)

(in millions)

           
Quarterly Period Ended Three Quarterly Periods Ended

June 28,
2014

 

June 29,
2013

June 28,
2014

 

June 29,
2013

Net sales:
Rigid Open Top $ 303 $ 312 $ 820 $ 828
Rigid Closed Top   381   370   1,073   1,036
Rigid Packaging $ 684 $ 682 $ 1,893 $ 1,864
Engineered Materials 371 351 1,081 1,030
Flexible Packaging   243   188   674   549
Total $ 1,298 $ 1,221 $ 3,648 $ 3,443
Operating income:
Rigid Open Top $ 1 $ 35 $ 20 $ 95
Rigid Closed Top   38   43   101   97
Rigid Packaging $ 39 $ 78 $ 121 $ 192
Engineered Materials 33 31 90 88
Flexible Packaging   11   8   12   16
Total $ 83 $ 117 $ 223 $ 296
Depreciation and amortization:
Rigid Open Top $ 23 $ 23 $ 70 $ 68
Rigid Closed Top   33   33   93   98
Rigid Packaging $ 56 $ 56 $ 163 $ 166
Engineered Materials 19 18 56 53
Flexible Packaging   16   12   42   39
Total $ 91 $ 86 $ 261 $ 258
Restructuring and impairment charges:
Rigid Open Top $ 11 $ $ 13 $ 1
Rigid Closed Top       1   3
Rigid Packaging $ 11 $ $ 14 $ 4
Engineered Materials 2 1 6 2
Flexible Packaging   2     8   1
Total $ 15 $ 1 $ 28 $ 7
Other operating expenses:
Rigid Open Top $ 14 $ 2 $ 33 $ 6
Rigid Closed Top   5   1   13   7
Rigid Packaging $ 19 $ 3 $ 46 $ 13
Engineered Materials 1 1 4 4
Flexible Packaging   3     13   3
Total $ 23 $ 4 $ 63 $ 20
Operating EBITDA:
Rigid Open Top $ 49 $ 60 $ 136 $ 170
Rigid Closed Top   76   77   208   205
Rigid Packaging $ 125 $ 137 $ 344 $ 375
Engineered Materials 55 51 156 147
Flexible Packaging   32   20   75   59
Total $ 212 $ 208 $ 575 $ 581
 
           

Berry Plastics Group, Inc.

Reconciliation Schedules

(Unaudited)

(in millions, except per share data)

 
Four Quarters
Quarterly Period Ended Ended

June 28,
2014

 

June 29,
2013

June 28,
2014

 
Net income $ 15 $ 40 $ 59
 
Add: interest expense 56 57 224
Add: income tax expense (benefit)   (19 )   22     (1 )
EBIT (1) $ 52 $ 119 $ 282
 
Add: depreciation and amortization 91 86 344
Add: restructuring and impairment 15 1 35
Add: extinguishment of debt 33 35
Add: other expense   21     2     73  
Operating EBITDA (1) $ 212   $ 208   $ 769  
 
Add: pro forma acquisitions 6 28

Add: unrealized cost savings

  5     38  
Adjusted EBITDA (1) $ 223   $ 835  
 
 
Cash flow from operating activities $ 120 $ 132 $ 537
Additions to property, plant, and equipment, net (54 ) (69 ) (214 )
Tax receivable agreement payment           (32 )
Adjusted free cash flow (1) $ 66   $ 63   $ 291  
 
 
Net income per share-diluted $ 0.12 $ 0.33
Restructuring and impairment charges (net of tax) 0.08 0.01
Loss on extinguishment of debt (net of tax) 0.19
Other expense (net of tax)   0.12     0.01  
Adjusted net income per diluted share (1) $ 0.51   $ 0.35  
 

(1) 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 are among the indicators used by management to measure the performance of the Company’s operations, and also among the criteria upon which performance-based compensation may be based. Adjusted EBITDA also is used by our lenders for debt covenant compliance purposes. We use Adjusted Free Cash Flow as a measure of liquidity because it assists us in assessing our company’s ability to fund its growth through its generation of cash. Our projected Adjusted Free Cash flow for fiscal 2014 assumes $532 million of cash flow from operations less $230 million of net additions to property, plant, and equipment and $32 million of payment under our tax receivable agreement.

Similar non-GAAP financial measures may be calculated differently by other companies, including other companies in our industry, limiting their usefulness as comparative measures. Because of these limitations, you should consider the non-GAAP financial measures alongside other performance measures and liquidity measures, including operating income, various cash flow metrics, net income and our other GAAP results.

Contacts

Berry Plastics Group, Inc.
Investor Contact:
Dustin Stilwell, 812-306-2964
dustinstilwell@berryplastics.com
or
Media Contact:
Eva Schmitz, 812-306-2424
evaschmitz@berryplastics.com

Release Summary

Berry Plastics Group Reports Third Quarter Fiscal Results

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Contacts

Berry Plastics Group, Inc.
Investor Contact:
Dustin Stilwell, 812-306-2964
dustinstilwell@berryplastics.com
or
Media Contact:
Eva Schmitz, 812-306-2424
evaschmitz@berryplastics.com