Berry Announces Second Quarter 2024 Results

Second Quarter Highlights

• GAAP: Net sales of $3.1 billion; Operating income of $208 million; Earnings per share of $0.98
• Non-GAAP: Operating EBITDA of $522 million; Adjusted earnings per share of $1.95
• Second quarter volume and earning results in-line with expectations; Strong April volumes provides confidence for low-single digit volume growth outlook in 2H
• Increased cost savings program target by 18% or an additional $25 million
• Continued progress in portfolio optimization with two divestitures closed; proceeds could exceed $2 billion in cash from strategic divestitures over the next year ($1 billion from previously announced merger and $1 billion from future portfolio optimization opportunities)
• Reaffirming fiscal 2024 outlook: Adjusted EPS of $7.35 - $7.85 and free cash flow of $800 - $900 million

Kevin Kwilinski, Berry's CEO said, "Berry once again produced solid financial results, consistent with our expectations. Our teams executed well, offsetting an extended period of sluggish macroeconomic demand along with persistent inflation in our primary raw material to start fiscal 2024. We undertook additional structural enhancements across our businesses and increased our original cost savings target of $140 million to $165 million. We continue to expect a $55 million contribution from the program in fiscal 2024 with the additional $25 million to be realized in fiscal 2025. Moving forward, we remain steadfast in our commitment to prudent management and strategic advancement.

During the quarter, operating EBITDA margins demonstrated sequential improvement compared to the prior quarter across all four business segments. Our year-to-date results reinforce our trajectory toward achieving our fiscal 2024 guidance—a reaffirmation we made today. We maintain confidence in the underlying strength of our businesses. Reinforced by strong April volumes, we continue to expect low-single digit volume growth in the second half of this fiscal year. As market volumes continue to recover, we anticipate incremental earnings benefits from more efficient asset utilization. I am excited by the tremendous growth and operational excellence opportunities ahead. We're focusing on three key efforts: optimizing our portfolio to accelerate growth and deleveraging, implementing our lean transformation, and driving growth by enhancing our commercial excellence.

Our firm dedication lies in delivering long-term value to our shareholders. In 2024, we will continue our focus on driving shareholder value and prioritizing debt repayment. Additionally, we remain committed to returning capital to shareholders through further share repurchases and dividend payments."

Key Financials ⁽¹⁾

Financial Results – Second Quarter 2024

Consolidated Overview

Net sales decreased 6% to $3.1 billion as the pass-through of lower resin prices had a 5% negative impact. Volumes declined 2%, which was in line with our expectations and all four operating segments showed sequential volume improvement over the first quarter.

Operating income declined compared to the prior year quarter, reaching $208 million. The decrease was primarily attributable to goodwill write-offs related to recent divestitures within our Consumer Packaging International segment, an unfavorable impact from volume and an unfavorable impact from price-cost spread related to the timing of passing through resin costs.

Consumer Packaging – International

Net sales decreased 9% to $968 million due to a negative impact from the pass-through of lower resin prices and the impact of completed divestitures. Volumes were relatively flat at 1% lower than the prior year with both consumer and industrial markets improving sequentially.

Operating income declined to $3 million, primarily due to goodwill write-offs related to recent divestitures and a modest unfavorable impact from volumes.

Consumer Packaging – North America

Net sales decreased 3% to $751 million driven by a 3% volume decline. Sequentially, volumes improved, led by our food, beverage, personal care, home care and industrial markets while foodservice markets saw modest declines. Consumer demand remained soft primarily due to inflation.

Operating income decreased to $77 million, mainly attributable to an unfavorable impact from the price-cost spread related to the timing of passing through resin costs and a modest unfavorable impact from volumes.

Flexibles

Net sales decreased by 9%, reaching $711 million, resulting from a 4% volume decline and a negative impact from the pass-through of lower resin prices. The volume decline was split between our concentrated effort to improve our product mix, along with softer demand in our North American markets. However, this was partially offset by positive growth of 2% in European flexible markets, particularly led by agricultural films.

Operating income remained similar to the prior year quarter, coming in at $95 million. While positive mix improvements contributed, they were partially offset by the volume decline.

Health, Hygiene & Specialties

Net sales decreased by 5% totaling $646 million. The decline was primarily due to the pass-through of lower resin prices and a 2% volume decline. Notably, the surgical suite and hard-surface disinfectant wipe markets delivered solid volume growth. Our hygiene and specialty markets experienced modest declines compared to prior year, but demonstrated sequential growth from the December quarter.

Operating income remained relatively flat compared to the prior year quarter at $33 million.

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, pay down debt, pursue bolt-on acquisitions, and return cash to shareholders through a compelling dividend as well as share repurchases. The Company expects to be within its leverage target of 2.5x – 3.5x by the end of fiscal 2024, while also returning cash to shareholders during the year, through continued share repurchases and dividends, 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 $0.275 per share payable on June 17, 2024 to stockholders of record as of June 3, 2024. During the second quarter of fiscal 2024, Berry repurchased 1.4 million shares for $81 million, leaving $354 million authorized for share repurchases at the end of the second fiscal quarter. Berry may repurchase shares through the open market, privately negotiated transactions or other programs, subject to market conditions. The Company continues to expect to make repurchases during the fiscal year while primarily focusing on lowering our leverage. Share repurchases are subject to market conditions, available cash on hand and cash needs, overall financial condition, and other factors considered relevant by our Board of Directors.

Announcement of Combination of Berry's Health, Hygiene and Specialties Global Nonwovens and Films Business with Glatfelter Corporation

In February, the Company announced plans for a tax-free spin-off and merger of the majority of its HH&S segment to include its global nonwovens and films business with Glatfelter Corporation ("GLT") to create a global leader in specialty materials. Upon the completion of the transaction, Berry shareholders are expected to own approximately ninety percent of the newly combined company. The transaction valued the combined company at $3.6 billion on an enterprise value basis. In April, the Company achieved a regulatory milestone with the expiration of the required waiting period under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act. The transaction is subject to further certain customary closing conditions and regulatory approvals including, but not limited to, approval by GLT shareholders, the effective filing of related registration statements, completion of a tax-free spin-off and receipt of certain required anti-trust approvals.

"This announcement is the culmination of a comprehensive review to determine the highest value alternative for Berry shareholders. We believe these two businesses can drive significant value for their respective stakeholders with more focused portfolios, positioning each for greater success. Berry will now become a pure-play leading supplier of innovative, sustainable global packaging solutions and we believe this focus will result in an even more predictable, stable earnings and growth profile for Berry. This proposed transaction is a significant step in the optimization of our portfolio and allows Berry's management team to be one hundred percent laser-focused on driving consistent long-term growth with a more simplified and aligned portfolio," stated Kevin Kwilinski, Berry's CEO.

Fiscal Year 2024 Guidance - Reaffirmed

• Adjusted earnings per share range of $7.35 - $7.85
• Cash flow from operations range of $1.35 - $1.45 billion; free cash flow range of $800-$900 million
• Committed to debt reduction along with returning capital to shareholders through share repurchases and dividends

Investor Conference Call

The Company will host a conference call today, May 9, 2024, at 10 a.m. U.S. Eastern Time to discuss our second fiscal quarter 2024 results. We expect the call to last approximately one hour. 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 innovative packaging solutions 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 over 40,000 global employees across more than 250 locations, we partner with customers to develop, design, and manufacture innovative products with an eye toward the circular economy. The challenges we solve and the innovations we pioneer benefit our customers at every stage of their journey. For more information, visit our website, or connect with us on LinkedIn or X.

Non-GAAP Financial Measures and Estimates

This press release includes non-GAAP financial measures such as operating EBITDA, Adjusted operating income, Adjusted earnings per share (or adjusted EPS), free cash flow, and comparable basis net sales, comparable adjusted EPS and comparable 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 adjusted EPS and free cash flow 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 as well as estimates and statements as to the expected timing, completion and effects of the proposed transaction between Berry and Glatfelter, 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 estimates and statements about the benefits of the Glatfelter transaction, including future financial and operating results, the combined company's plans, objectives, expectations and intentions, and other statements that are not historical facts, as well as 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; (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; (16) the occurrence of any event, change or other circumstances that could give rise to the termination of the proposed transaction; (17) the risk that Glatfelter shareholder may not approve the transaction proposals; (18) the risk that the necessary regulatory approvals may not be obtained or may be obtained subject to conditions that are not anticipated; (19) risks that any of the other closing conditions to the proposed transaction may not be satisfied in a timely manner; (20) risks that the anticipated tax treatment of the proposed transaction is not obtained; (21) risks related to potential litigation brought in connection with the proposed transaction; (22) uncertainties as to the timing of the consummation of the proposed transaction; (23) risks and costs related to the implementation of the separation of the Berry Spinco from Berry., including timing anticipated to complete the separation, any changes to the configuration of the businesses included in the separation if implemented, as well as unexpected costs, charges or expenses resulting from the proposed transaction; (24) the risk that the integration of the combined companies is more difficult, time consuming or costly than expected; (25) risks related to financial community and rating agency perceptions of each of Berry and Glatfelter and its business, operations, financial condition and the industry in which they operate; (26) risks related to disruption of management time from ongoing business operations due to the proposed transaction; (27) failure to realize the benefits expected from the proposed transaction; (28) the effects of the announcement, pendency or completion of the proposed transaction on the ability of the parties to retain customers and retain and hire key personnel and maintain relationships with their counterparties, and on their operating results and businesses generally; and (29) 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 ("SEC"). These risks, as well as other risks associated with the proposed transaction, will be more fully discussed in the registration statements, proxy statement/prospectus and other documents that will be filed with the SEC in connection with the proposed transaction. 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.

Additional Information and Where to Find It

This communication may be deemed to be solicitation material in respect of the proposed transaction between Berry and Glatfelter. In connection with the proposed transaction, Berry and Glatfelter intend to file relevant materials with the SEC, including a registration statement for Spinco in connection with the separation and spin-off as well as a registration statement on Form S-4 by Glatfelter that will contain a proxy statement/prospectus of Glatfelter relating to the proposed transaction. This communication is not a substitute for the registration statements, proxy statement/prospectus or any other document which Berry and/or Glatfelter may file with the SEC. STOCKHOLDERS OF BERRY AND GLATFELTER ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE REGISTRATION STATEMENTS AND PROXY STATEMENT/PROSPECTUS BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and security holders will be able to obtain copies of the registration statements and proxy statement/prospectus (when available) as well as other filings containing information about Berry and Glatfelter, as well as Spinco, without charge, at the SEC's website, http://www.sec.gov. Copies of documents filed with the SEC by Berry or Spinco will be made available free of charge on Berry's investor relations website at https://ir.berryglobal.com. Copies of documents filed with the SEC by Glatfelter will be made available free of charge on Glatfelter's investor relations website at https://www.glatfelter.com/investors.

No Offer or Solicitation

This communication is for informational purposes only and is not intended to and does not constitute an offer to sell, or the solicitation of an offer to sell, subscribe for or buy, or a solicitation of any vote or approval in any jurisdiction, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in which such offer, sale or solicitation would be unlawful, prior to registration or qualification under the securities laws of any such jurisdiction. No offer or sale of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended, and otherwise in accordance with applicable law.

Participants in Solicitation

Berry and its directors and executive officers, and Glatfelter and its directors and executive officers, may be deemed to be participants in the solicitation of proxies from the holders of Glatfelter capital stock and/or the offering of securities in respect of the proposed transaction. Information about the directors and executive officers of Berry, including a description of their direct or indirect interests, by security holdings or otherwise, is set forth under the caption "Security Ownership of Beneficial Owners and Management" in the definitive proxy statement for Berry's 2024 Annual Meeting of Stockholders, which was filed with the SEC on January 4, 2024 (https://www.sec.gov/ixviewer/ix.html?doc=/Archives/edgar/data/0001378992/000110465924001073/tm2325571d6_def14a.htm). Information about the directors and executive officers of Glatfelter, including a description of their direct or indirect interests, by security holdings or otherwise, is set forth under the caption "Ownership of Company Stock" in the proxy statement for Glatfelter's 2024 Annual Meeting of Shareholders, which was filed with the SEC on March 26, 2024 (https://www.sec.gov/ix?doc=/Archives/edgar/data/0000041719/000004171924000013/glt-20240322.htm). In addition, Curt Begle, the current President of Berry's Health, Hygiene & Specialties Division, will be appointed as Chief Executive Officer of the combined company. Investors may obtain additional information regarding the interest of such participants by reading the proxy statement/prospectus regarding the proposed transaction when it becomes available.

(BERY-F)

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