UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended June 29, 2024
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934
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For the transition period from __________ to __________
Commission File Number 001-35672
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A
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(
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IRS employer identification number
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Securities registered pursuant to Section 12(b) of the Exchange Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated Filer ☐
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Non-Accelerated Filer ☐
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Smaller Reporting Company
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Emerging Growth Company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
There were 114.6 million shares of common stock
outstanding at August 2, 2024.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Information included or incorporated by reference in Berry Global Group, Inc.’s
filings with the U.S. Securities and Exchange Commission (the “SEC”) and press releases or other public statements contains or may contain forward-looking statements. This report includes “forward-looking” statements with respect to our
financial condition, results of operations and business and our expectations or beliefs concerning future events. These statements contain words such as “believes,” “expects,” “may,” “will,” “should,” “would,” “could,” “seeks,” “approximately,”
“intends,” “plans,” “estimates,” “project,” “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. 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. All forward-looking statements are made only as of the date hereof, and 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.
Additionally, we caution readers that the list of important factors discussed in
our most recent Form 10-K in the section titled “Risk Factors” and subsequent periodic reports filed with the SEC may not contain all of the material factors that are important to you. In addition, in light of these risks and uncertainties,
the matters referred to in the forward-looking statements contained in this report may not in fact occur. Accordingly, readers should not place undue reliance on those statements.
Form 10-Q Index
For Quarterly Period Ended June 29, 2024
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Part I.
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Financial Information
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Page No.
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Item 1.
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Financial Statements:
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4
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5
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6
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7
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8
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Item 2.
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15
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Item 3.
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20
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Item 4.
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20
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Part II.
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Other Information
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Item 1.
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21
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Item 1A.
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21
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Item 2.
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21
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Item 5.
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21
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Item 6.
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22
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23
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Part I. Financial Information
| Item 1. |
Financial Statements
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Consolidated Statements of Income
(Unaudited)
(in millions of dollars, except per share amounts)
|
Quarterly Period Ended
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Three Quarterly Periods Ended
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|||||||||||||||
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June 29, 2024
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July 1, 2023
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June 29, 2024
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July 1, 2023
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|||||||||||||
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Net sales
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$
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$
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$
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$
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||||||||
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Costs and expenses:
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||||||||||||||||
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Cost of goods sold
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Selling, general and administrative
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Amortization of intangibles
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Restructuring and transaction activities
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Operating income
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||||||||||||
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Other expense (income)
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(
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)
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Interest expense
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Income before income taxes
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Income tax expense
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||||||||||||
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Net income
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$
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$
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$
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$
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||||||||
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Net income per share:
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||||||||||||||||
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Basic
|
$
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$
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$
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$
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||||||||
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Diluted
|
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||||||||||||
Consolidated Statements of Comprehensive Income
(Unaudited)
(in millions of dollars)
|
Quarterly Period Ended
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Three Quarterly Periods Ended
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|||||||||||||||
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June 29, 2024
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July 1, 2023
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June 29, 2024
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July 1, 2023
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|||||||||||||
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Net income
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$
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$
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$
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$
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||||||||
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Other comprehensive income (loss), net of tax:
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||||||||||||||||
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Currency translation
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(
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)
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|||||||||||
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Derivative instruments
|
(
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)
|
|
(
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)
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(
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)
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|||||||||
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Other comprehensive income (loss)
|
(
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)
|
|
(
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)
|
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||||||||||
|
Comprehensive income
|
$
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|
$
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|
$
|
|
$
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|
||||||||
See notes to consolidated financial statements.
Consolidated Balance Sheets
(in millions of dollars)
|
June 29, 2024
|
September 30, 2023
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|||||||
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(Unaudited)
|
||||||||
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Assets
|
||||||||
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Current assets:
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||||||||
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Cash and cash equivalents
|
$
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$
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||||
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Accounts receivable
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||||||
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Finished goods
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||||||
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Raw materials and supplies
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Prepaid expenses and other current assets
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||||||
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Total current assets
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||||||
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Noncurrent assets:
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||||||||
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Property, plant and equipment
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||||||
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Goodwill and intangible assets
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||||||
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Right-of-use assets
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Other assets
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||||||
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Total assets
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$
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$
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||||
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Liabilities and stockholders’ equity
|
||||||||
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Current liabilities:
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||||||||
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Accounts payable
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$
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$
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Accrued employee costs
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||||||
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Other current liabilities
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Current portion of long-term debt
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Total current liabilities
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Noncurrent liabilities:
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Long-term debt
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Deferred income taxes
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Employee benefit obligations
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Operating lease liabilities
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Other long-term liabilities
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Total liabilities
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Stockholders’ equity:
|
||||||||
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Common stock (
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||||||
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Additional paid-in capital
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||||||
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Retained earnings
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||||||
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Accumulated other comprehensive loss
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(
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)
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(
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)
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||||
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Total stockholders’ equity
|
|
|
||||||
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Total liabilities and stockholders’ equity
|
$
|
|
$
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|
||||
See notes to consolidated financial statements.
Consolidated Statements of Cash Flows
(Unaudited)
(in millions of dollars)
|
Three Quarterly Periods Ended
|
||||||||
|
June 29, 2024
|
July 1, 2023
|
|||||||
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Cash Flows from Operating Activities:
|
||||||||
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Net income
|
$
|
|
$
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|
||||
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Adjustments to reconcile net cash from operating activities:
|
||||||||
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Depreciation
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||||||
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Amortization of intangibles
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||||||
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Non-cash interest (income), net
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(
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)
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(
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)
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||||
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Settlement of derivatives
|
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||||||
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Deferred income tax
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(
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)
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(
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)
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||||
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Share-based compensation expense
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Loss on divestitures
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||||||
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Other non-cash operating activities, net
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||||||
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Changes in working capital
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(
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)
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(
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)
|
||||
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Changes in other assets and liabilities
|
(
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)
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(
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)
|
||||
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Net cash from operating activities
|
|
|
||||||
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Cash Flows from Investing Activities:
|
||||||||
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Additions to property, plant and equipment, net
|
(
|
)
|
(
|
)
|
||||
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Divestiture of business
|
|
|
||||||
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Acquisition of business and other
|
(
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)
|
(
|
)
|
||||
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Net cash from investing activities
|
(
|
)
|
(
|
)
|
||||
|
Cash Flows from Financing Activities:
|
||||||||
|
Proceeds from long-term borrowings
|
|
|
||||||
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Repayments on long-term borrowings
|
(
|
)
|
(
|
)
|
||||
|
Proceeds from issuance of common stock
|
|
|
||||||
|
Repurchase of common stock
|
(
|
)
|
(
|
)
|
||||
|
Dividends paid
|
(
|
)
|
(
|
)
|
||||
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Other, net
|
(
|
)
|
|
|||||
|
Net cash from financing activities
|
(
|
)
|
(
|
)
|
||||
|
Effect of currency translation on cash
|
|
|
||||||
|
Net change in cash and cash equivalents
|
(
|
)
|
(
|
)
|
||||
|
Cash and cash equivalents at beginning of period
|
|
|
||||||
|
Cash and cash equivalents at end of period
|
$
|
|
$
|
|
||||
See notes to consolidated financial statements.
Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
(in millions of dollars)
|
Quarterly Period Ended
|
Common
Stock
|
Additional
Paid-in Capital
|
Accumulated Other
Comprehensive Loss
|
Retained
Earnings
|
Total
|
|||||||||||||||
|
Balance at March 30, 2024
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
|||||||||
|
Net income
|
|
|
|
|
|
|||||||||||||||
|
Other comprehensive (loss)
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||
|
Share-based compensation
|
|
|
|
|
|
|||||||||||||||
|
Proceeds from issuance of common stock
|
|
|
|
|
|
|||||||||||||||
|
Common stock repurchased and other
|
|
(
|
)
|
|
(
|
)
|
(
|
)
|
||||||||||||
|
Dividends paid
|
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||
|
Balance at June 29, 2024
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
|||||||||
|
Balance at April 1, 2023
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
|||||||||
|
Net income
|
|
|
|
|
|
|||||||||||||||
|
Other comprehensive income
|
|
|
|
|
|
|||||||||||||||
|
Share-based compensation
|
|
|
|
|
|
|||||||||||||||
|
Proceeds from issuance of common stock
|
|
|
|
|
|
|||||||||||||||
|
Common stock repurchased and other
|
|
(
|
)
|
|
(
|
)
|
(
|
)
|
||||||||||||
|
Dividends paid
|
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||
|
Balance at July 1, 2023
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
|||||||||
|
Three Quarterly Periods Ended
|
Common
Stock
|
Additional
Paid-in Capital
|
Accumulated Other
Comprehensive Loss
|
Retained
Earnings
|
Total
|
|||||||||||||||
|
Balance at September 30, 2023
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
|||||||||
|
Net income
|
|
|
|
|
|
|||||||||||||||
|
Other comprehensive (loss)
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||
|
Share-based compensation
|
|
|
|
|
|
|||||||||||||||
|
Proceeds from issuance of common stock
|
|
|
|
|
|
|||||||||||||||
|
Common stock repurchased and other
|
|
(
|
)
|
|
(
|
)
|
(
|
)
|
||||||||||||
|
Dividends paid
|
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||
|
Balance at June 29, 2024
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
|||||||||
|
Balance at October 1, 2022
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
|||||||||
|
Net income
|
|
|
|
|
|
|||||||||||||||
|
Other comprehensive income
|
|
|
|
|
|
|||||||||||||||
|
Share-based compensation
|
|
|
|
|
|
|||||||||||||||
|
Proceeds from issuance of common stock
|
|
|
|
|
|
|||||||||||||||
|
Common stock repurchased and other
|
|
(
|
)
|
|
(
|
)
|
(
|
)
|
||||||||||||
|
Dividends paid
|
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||
|
Balance at July 1, 2023
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
|||||||||
See notes to consolidated financial statements.
Notes to Consolidated Financial Statements
(Unaudited)
(tables in millions of dollars, except per share data)
1. Basis of Presentation
2. Revenue and Accounts Receivable
Our revenues are primarily derived from the sale of non-woven, flexible and rigid products to customers. Revenue is recognized when
performance obligations are satisfied, in an amount reflecting the consideration to which the Company expects to be entitled. We consider the promise to transfer products to be our sole performance obligation. If the consideration agreed to in a
contract includes a variable amount, we estimate the amount of consideration we expect to be entitled to in exchange for transferring the promised goods to the customer using
the most likely amount method. Our main source of variable consideration is customer rebates. There are no material instances where variable consideration is constrained and not recorded at the initial time of sale. Generally, our revenue is
recognized at a point in time for standard promised goods at the time of shipment, when title and risk of loss pass to the customer. The accrual for customer rebates was $106
Accounts receivable are presented net of allowance for credit losses of $19
The Company has entered into various factoring agreements, including customer-based supply chain financing programs, to sell certain
receivables to third-party financial institutions. Agreements which result in true sales of the transferred receivables, which occur when receivables are transferred without recourse to the Company, are reflected as a reduction of accounts receivable
on the Consolidated Balance Sheets and the proceeds are included in the Cash Flows from Operating Activities in the Consolidated Statements of Cash Flows. The fees associated with the transfer of receivables for all programs were not material for any
of the periods presented.
3. Acquisition
In April 2024, the Company acquired F&S Tool Inc. (“F&S”), a leading manufacturer of high output, high efficiency injection molding applications, for
a purchase price of $68 million. The acquired business is operated within the Consumer Packaging North America segment. To finance the
purchase, the Company used existing liquidity. The acquisition has been accounted for under the purchase method of accounting and accordingly, the purchase price has been allocated to the identifiable assets and liabilities based on preliminary
values at the acquisition date. The Company has recognized $48 million of goodwill on this transaction primarily as a result of expected cost
synergies and does not expect goodwill to be deductible for tax purposes.
4. Divestitures and Spin-off
During fiscal 2024, the Company completed the sale of its Strata and Promens Vehicles businesses, which were operated in the Consumer Packaging International
segment for net proceeds of $25 million and $22
million, respectively. In fiscal 2023, the Strata business recorded net sales of $56 million and Promens Vehicles recorded $111 million.
In February 2024, the Company announced plans for a spin-off and merger of our Health, Hygiene & Specialties Global Nonwovens and Films business (“HHNF”)
with Glatfelter Corporation (“GLT”). Upon the completion of the transaction, shareholders of Berry will own approximately ninety percent of the
new combined company in addition to their continuing interest in Berry. The transaction is subject to certain customary closing conditions including, but not limited to, approval by GLT shareholders and, the effective filing of related registration
statements.
5. Restructuring and Transaction Activities
During fiscal 2023, the Company announced several plant rationalizations in all four segments in order to deliver cost savings and optimize equipment utilization. Over the duration of the plan, these plant rationalizations and other cost reduction actions are projected to cost approximately $250 million with the operations savings intended to counter general economic softness. The plant rationalizations are expected to be fully implemented by
the end of fiscal 2025.
The table below includes the significant components of our restructuring and transaction activities, by reporting segment:
|
Quarterly Period Ended
|
Three Quarterly Periods Ended
|
Restructuring Plans
|
||||||||||||||||||
|
June 29, 2024
|
July 1, 2023
|
June 29, 2024
|
July 1, 2023
|
Life to date (a)
|
||||||||||||||||
|
Consumer Packaging International
|
$
|
|
$
|
|
$
|
|
$
|
|
|
|||||||||||
|
Consumer Packaging North America
|
|
|
|
|
|
|||||||||||||||
|
Health, Hygiene & Specialties
|
|
|
|
|
|
|||||||||||||||
|
Flexibles
|
|
|
|
|
|
|||||||||||||||
|
Consolidated
|
$
|
|
$
|
|
$
|
|
$
|
|
|
|||||||||||
(a) Excludes $57 million loss on
divestitures (See Note 4)
The table below sets forth the activity with respect to the restructuring and transaction activities accrual at June 29, 2024:
|
Restructuring
|
||||||||||||||||||||
|
Employee
Severance
and Benefits
|
Facility
Exit Costs
|
Non-cash
Impairment
Charges
|
Transaction
Activities
|
Total
|
||||||||||||||||
|
Balance as of September 30, 2023
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
Charges
|
|
|
|
|
|
|||||||||||||||
|
Non-cash items
|
|
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||
|
Cash
|
(
|
)
|
(
|
)
|
|
(
|
)
|
(
|
)
|
|||||||||||
|
Balance as of June 29, 2024
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
6. Leases
The Company leases certain manufacturing facilities, warehouses, office space, manufacturing equipment, office equipment, and automobiles.
Supplemental lease information is as follows:
|
Leases
|
Classification
|
June 29, 2024
|
September 30, 2023
|
||||||
|
Operating leases:
|
|||||||||
|
Operating lease right-of-use assets
|
|
$
|
|
$
|
|
||||
|
Current operating lease liabilities
|
|
|
|
||||||
|
Noncurrent operating lease liabilities
|
|
|
|
||||||
|
Finance leases:
|
|||||||||
|
Finance lease right-of-use assets
|
|
$
|
|
$
|
|
||||
|
Current finance lease liability
|
|
|
|
||||||
|
Noncurrent finance lease liabilities
|
|
|
|
||||||
7. Long-Term Debt
Long-term debt consists of the following:
|
Facility
|
Maturity Date
|
June 29, 2024
|
September 30, 2023
|
||||||
|
Term loan (a)
|
|
$
|
|
$
|
|
||||
|
Term loan (a)
|
|
|
|
||||||
|
Revolving line of credit
|
|
|
|
||||||
|
|
|
|
|
||||||
|
|
|
|
|
||||||
|
|
|
|
|
||||||
|
|
|
|
|
||||||
|
|
|
|
|
||||||
|
|
|
|
|
||||||
|
|
|
|
|
||||||
|
|
|
|
|
||||||
|
|
|
|
|
||||||
|
|
|
|
|
||||||
|
Debt discounts and deferred fees
|
(
|
)
|
(
|
)
|
|||||
|
Finance leases and other
|
Various
|
|
|
||||||
|
Retired debt
|
|
|
|||||||
|
Total long-term debt
|
|
|
|||||||
|
Current portion of long-term debt
|
(
|
)
|
(
|
)
|
|||||
|
Long-term debt, less current portion
|
$
|
|
$
|
|
|||||
| (a) |
|
| (b) |
|
| (c) |
|
During fiscal 2024, the Company extended the maturity date of $1,550
million of its outstanding term loans to July 2029. In addition, the Company issued $800 million aggregate principal amount of 5.65 % First Priority Senior Secured Notes due 2034, and another $800 million aggregate principal amount of 5.80 % First Priority Senior Secured Notes due 2031. The proceeds from
the 5.65 % First Priority Notes were used to prepay the 0.95 % First Priority Senior Secured Notes due in February 2024 and a portion of the existing term loan due in July 2026. The proceeds from the 5.80 % First Priority Notes were used to repurchase a portion of the 4.875 % First Priority Senior Secured Notes due
in July 2026 and to prepay a portion of the existing term loan due in July 2026.
Debt discounts and deferred financing fees are presented net of Long-term debt,
less the current portion on the Consolidated Balance Sheets and are amortized to Interest expense, net on the Consolidated Statements of Income through maturity.
8. Financial Instruments and Fair Value Measurements
In the normal course of business, the Company is exposed to certain risks arising from business operations and economic factors. The Company may use derivative
financial instruments to help manage market risk and reduce the exposure to fluctuations in interest rates and foreign currencies. These financial instruments are not used for trading or other speculative purposes.
Cross-Currency Swaps
The Company is party to certain cross-currency swaps to hedge a portion of our foreign currency risk. During the quarter, the Company repriced and extended all
of its existing cross-currency swaps, which now mature June 2026 (€1,625 million and £700 million). In addition to cross-currency swaps, we hedge a portion of our foreign currency risk by designating foreign currency denominated long-term debt as net investment
hedges of certain foreign operations. As of June 29, 2024, we had outstanding long-term debt of €379 million that was designated as a hedge of our net investment in certain euro-denominated foreign subsidiaries. When valuing cross-currency swaps the Company utilizes Level 2
inputs (substantially observable).
Interest Rate Swaps
During fiscal 2024, the Company received net proceeds of $27
million related to the settlement of existing interest rate swaps. The offset is included in Accumulated other comprehensive loss and is being amortized to Interest expense through the term of the original swaps. Following the transactions, the
Company entered into a $450 million interest rate swap transaction, a $500 million interest rate swap transaction and extended an existing $400
million agreement all with expirations in June 2029.
As of June 29, 2024, the Company effectively had
(i) a $400 million interest rate swap transaction that swaps a one-month variable contract for a fixed annual rate of 4.008 %, with an expiration in June 2029 (ii) a $450 million interest rate swap transaction that swaps a one-month
variable contract for a fixed annual rate of 4.553 %,
with an expiration in June 2029, and (iii) a $500
million interest rate swap transaction that swaps a one-month variable contract for a fixed annual rate of 4.648 %, with an expiration in June 2029.
The Company records the fair value positions of all derivative financial instruments on a net basis by counterparty for
which a master netting arrangement is utilized. Balances on a gross basis are as follows:
|
Derivative Instruments
|
Hedge Designation
|
Balance Sheet Location
|
June 29, 2024
|
September 30, 2023
|
||||||
|
Cross-currency swaps
|
Designated
|
Other current liabilities
|
|
|
||||||
|
Cross-currency swaps
|
Designated
|
Other long-term liabilities
|
|
|
||||||
|
Interest rate swaps
|
Designated
|
Other long-term assets
|
|
|
||||||
|
Interest rate swaps
|
Designated
|
Other long-term liabilities
|
|
|
||||||
|
Interest rate swaps
|
Not designated
|
Other long-term assets
|
|
|
||||||
|
Interest rate swaps
|
Not designated
|
Other long-term liabilities
|
|
|
||||||
The effect of the Company’s derivative instruments on the Consolidated Statements of Income is as follows:
|
Quarterly Period Ended
|
Three Quarterly Periods Ended
|
||||||||||||||||
|
Derivative Instruments
|
Statements of Income Location
|
June 29, 2024
|
July 1, 2023
|
June 29, 2024
|
July 1, 2023
|
||||||||||||
|
Cross-currency swaps
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
||||
|
Interest rate swaps
|
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Non-recurring Fair Value Measurements
The Company has certain assets that are measured at fair value on a non-recurring basis when impairment indicators are present or when the Company completes an
acquisition. The Company adjusts certain long-lived assets to fair value only when the carrying values exceed the fair values. The categorization of the framework used to value the assets is considered Level 3, due to the subjective nature of the
unobservable inputs used to determine the fair value. These assets that are subject to our annual impairment analysis primarily include our definite lived and indefinite lived intangible assets, including Goodwill and our property, plant and
equipment. The Company reviews Goodwill and other indefinite lived assets for impairment as of the first day of the fourth fiscal quarter each year and more frequently if impairment indicators exist. The Company determined Goodwill and other
indefinite lived assets were not impaired in our annual fiscal 2023 assessment. No impairment indicators were identified in the current
quarter.
Included in the following table are the major categories of assets measured at fair value on a non-recurring basis as of June 29, 2024 and September 30, 2023, along
with the impairment loss recognized on the fair value measurement during the period:
|
As of June 29, 2024
|
||||||||||||||||||||
|
Level 1
|
Level 2
|
Level 3
|
Total
|
Impairment
|
||||||||||||||||
|
Indefinite-lived trademarks
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
Goodwill
|
|
|
|
|
|
|||||||||||||||
|
Definite lived intangible assets
|
|
|
|
|
|
|||||||||||||||
|
Property, plant, and equipment
|
|
|
|
|
|
|||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
As of September 30, 2023
|
||||||||||||||||||||
|
Level 1
|
Level 2
|
Level 3
|
Total
|
Impairment
|
||||||||||||||||
|
Indefinite-lived trademarks
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
Goodwill
|
|
|
|
|
|
|||||||||||||||
|
Definite lived intangible assets
|
|
|
|
|
|
|||||||||||||||
|
Property, plant, and equipment
|
|
|
|
|
|
|||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
The Company’s financial instruments consist primarily of cash and cash equivalents,
long-term debt, interest rate and cross-currency swap agreements, and finance lease obligations. The book value of our marketable long-term indebtedness exceeded fair value by $215 million as of June 29, 2024. The
Company’s long-term debt fair values were determined using Level 2 inputs (substantially observable).
9. Income Taxes
On a year-to-date comparison to the statutory rate, the lower effective tax rate was positively impacted by foreign rate differential and other discrete items.
10. Segment and Geographic Data
The Company’s operations are organized into four
reporting segments: Consumer Packaging International, Consumer Packaging North America, Health, Hygiene & Specialties, and Flexibles. The structure is designed to align
us with our customers, provide improved service, drive future growth, and to facilitate synergies realization.
Selected information by reportable segment is presented in the following tables:
|
Quarterly Period Ended
|
Three Quarterly Periods Ended
|
|||||||||||||||
|
June 29, 2024
|
July 1, 2023
|
June 29, 2024
|
July 1, 2023
|
|||||||||||||
|
Net sales:
|
||||||||||||||||
|
Consumer Packaging International
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Consumer Packaging North America
|
|
|
|
|
||||||||||||
|
Health, Hygiene & Specialties
|
|
|
|
|
||||||||||||
|
Flexibles
|
|
|
|
|
||||||||||||
|
Total net sales
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Operating income:
|
||||||||||||||||
|
Consumer Packaging International
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Consumer Packaging North America
|
|
|
|
|
||||||||||||
|
Health, Hygiene & Specialties
|
|
|
|
|
||||||||||||
|
Flexibles
|
|
|
|
|
||||||||||||
|
Total operating income
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Depreciation and amortization:
|
||||||||||||||||
|
Consumer Packaging International
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Consumer Packaging North America
|
|
|
|
|
||||||||||||
|
Health, Hygiene & Specialties
|
|
|
|
|
||||||||||||
|
Flexibles
|
|
|
|
|
||||||||||||
|
Total depreciation and amortization
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Selected information by geographical region is presented in the following tables:
|
Quarterly Period Ended
|
Three Quarterly Periods Ended
|
|||||||||||||||
|
June 29, 2024
|
July 1, 2023
|
June 29, 2024
|
July 1, 2023
|
|||||||||||||
|
Net sales:
|
||||||||||||||||
|
United States and Canada
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Europe
|
|
|
|
|
||||||||||||
|
Rest of world
|
|
|
|
|
||||||||||||
|
Total net sales
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
11. Contingencies and Commitments
The Company is party to various legal proceedings involving routine claims which are incidental to its business. Although the Company’s legal and financial
liability with respect to such proceedings cannot be estimated with certainty, we believe that any ultimate liability would not be material to our financial position, results of operations or cash flows.
The Company has various purchase commitments for raw materials, supplies, and property and equipment incidental to the ordinary conduct of business.
12. Basic and Diluted Earnings Per Share
Basic net income or earnings per share ("EPS") is calculated by dividing the net income attributable to common stockholders by the weighted-average number of
common shares outstanding during the period, without consideration for common stock equivalents.
Diluted EPS includes the effects of options and restricted stock units, if dilutive.
The following tables provide a reconciliation of the numerator and denominator of the basic and diluted EPS calculations:
|
Quarterly Period Ended
|
Three Quarterly Periods Ended
|
|||||||||||||||
|
(in millions, except per share amounts)
|
June 29, 2024
|
July 1, 2023
|
June 29, 2024
|
July 1, 2023
|
||||||||||||
|
Numerator
|
||||||||||||||||
|
Consolidated net income
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Denominator
|
||||||||||||||||
|
Weighted average common shares outstanding - basic
|
|
|
|
|
||||||||||||
|
Dilutive shares
|
|
|
|
|
||||||||||||
|
Weighted average common and common equivalent shares outstanding - diluted
|
|
|
|
|
||||||||||||
|
Per common share earnings
|
||||||||||||||||
|
Basic
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Diluted
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
13. Accumulated Other Comprehensive Loss
The components and activity of Accumulated other comprehensive loss are as follows:
|
Quarterly Period Ended
|
Currency
Translation
|
Defined Benefit
Pension and Retiree
Health Benefit Plans
|
Derivative
Instruments
|
Accumulated Other
Comprehensive Loss
|
||||||||||||
|
Balance at March 30, 2024
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
|||||
|
Other comprehensive income (loss) before reclassifications
|
(
|
)
|
|
|
(
|
)
|
||||||||||
|
Net amount reclassified
|
|
|
(
|
)
|
(
|
)
|
||||||||||
|
Balance at June 29, 2024
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
|||||
|
Currency
Translation
|
Defined Benefit
Pension and Retiree
Health Benefit Plans
|
Derivative
Instruments
|
Accumulated Other
Comprehensive Loss
|
|||||||||||||
|
Balance at April 1, 2023
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
|||||
|
Other comprehensive income (loss) before reclassifications
|
|
|
|
|
||||||||||||
|
Net amount reclassified
|
|
|
(
|
)
|
(
|
)
|
||||||||||
|
Balance at July 1, 2023
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
|||||
|
Three Quarterly Periods Ended
|
Currency
Translation
|
Defined Benefit
Pension and Retiree
Health Benefit Plans
|
Derivative
Instruments
|
Accumulated Other
Comprehensive Loss
|
||||||||||||
|
Balance at September 30, 2023
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
|||||
|
Other comprehensive income (loss) before reclassifications
|
|
|
(
|
)
|
(
|
)
|
||||||||||
|
Net amount reclassified
|
|
|
(
|
)
|
(
|
)
|
||||||||||
|
Balance at June 29, 2024
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
|||||
|
Currency
Translation
|
Defined Benefit
Pension and Retiree
Health Benefit Plans
|
Derivative
Instruments
|
Accumulated Other
Comprehensive Loss
|
|||||||||||||
|
Balance at October 1, 2022
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
|||||
|
Other comprehensive income (loss) before reclassifications
|
|
|
|
|
||||||||||||
|
Net amount reclassified
|
|
|
(
|
)
|
(
|
)
|
||||||||||
|
Balance at July 1, 2023
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
|||||
Executive Summary
Business. The Company’s operations
are organized into four operating segments: Consumer Packaging International, Consumer Packaging North America, Health, Hygiene & Specialties, and Flexibles. The structure is designed to align us with our customers, provide improved service, drive
future growth, and to facilitate synergies realization. The Consumer Packaging International segment primarily consists of closures and dispensing systems, pharmaceutical devices and packaging, bottles and canisters, and containers. The Consumer
Packaging North America segment primarily consists of containers and pails, foodservice, closures, bottles, prescription vials, and tubes. The Health, Hygiene & Specialties segment primarily consists of healthcare, hygiene, specialties, and
tapes. The Flexibles segment primarily consists of stretch and shrink films, converter films, institutional can liners, food and consumer films, retail bags, and agriculture films.
Raw Material Trends. Our primary raw material is polymer resin. In addition, we use other materials such as colorants, linerboard, and packaging materials in various
manufacturing processes. While temporary industry-wide shortages of raw materials have occurred, we have historically been able to manage the supply chain disruption by working closely with our suppliers and customers. Changes in the price of raw
materials are generally passed on to customers through contractual price mechanisms over time, during contract renewals and other means.
Outlook. The Company is affected by general economic and industrial growth, raw material availability, cost inflation, supply chain disruptions, and general industrial production. Our business has both
geographic and end market diversity, which reduces the effect of any one of these factors on our overall performance. Our results are affected by our ability to pass through raw material and other cost changes to our customers, improve manufacturing
productivity, and adapt to volume changes of our customers. Despite global macro-economic challenges in the short-term attributed to continued rising inflation and general market softness, we continue to believe our underlying long-term fundamentals in
all divisions remain strong. For fiscal 2024, we project cash flow from operations of $1.4 billion and free cash flow of $800 million.
Projected fiscal 2024 free cash flow assumes $600 million of capital spending. For the calculation of free cash flow and further information
related to free cash flow as a non-GAAP financial measure, see “Liquidity and Capital Resources.”
Results of Operations
Comparison of the Quarterly Period Ended June 29, 2024 (the “Quarter”) and the Quarterly Period Ended July 1, 2023 (the “Prior Quarter”)
Business integration expenses consist of restructuring and impairment charges, acquisition and divestiture related costs, and other business
optimization costs. Tables present dollars in millions.
|
Consolidated Overview
|
||||||||||||||||
|
Quarter
|
Prior Quarter
|
$ Change
|
% Change
|
|||||||||||||
|
Net sales
|
$
|
3,161
|
$
|
3,229
|
$
|
(68
|
)
|
(2
|
)%
|
|||||||
|
Cost of goods sold
|
2,560
|
2,649
|
(89
|
)
|
(3
|
)%
|
||||||||||
|
Other operating expenses
|
298
|
313
|
(15
|
)
|
(5
|
)%
|
||||||||||
|
Operating income
|
$
|
303
|
$
|
267
|
$
|
36
|
13
|
%
|
||||||||
Net Sales: The net sales decline is primarily
attributed to decreased selling prices of $94 million due to the pass through of lower polymer costs, partially offset by 2% organic volume growth.
Cost of goods sold: The cost of goods sold decrease is
primarily attributed to lower raw material prices, partially offset by increased costs associated with increased volumes.
Other operating expenses: The other operating expenses
decrease is primarily attributed to higher business integration costs in the Prior Quarter from the 2023 cost savings initiative.
Operating Income: The operating income increase is primarily attributed to a $10 million favorable impact from volume increases, a $10 million favorable impact from price cost spread and a $13 million decline in business integration expenses.
|
Consumer Packaging International
|
||||||||||||||||
|
Quarter
|
Prior Quarter
|
$ Change
|
% Change
|
|||||||||||||
|
Net sales
|
$
|
959
|
$
|
1,036
|
$
|
(77
|
)
|
(7
|
)%
|
|||||||
|
Operating income
|
$
|
79
|
$
|
68
|
$
|
11
|
16
|
%
|
||||||||
Net sales: The net sales decline in the Consumer Packaging International segment is primarily attributed to decreased selling prices of $61 million from lower raw material costs and a $20 million decline from
divestures, partially offset by 1% organic volume growth.
Operating income: The operating income increase is primarily attributed to $3 million impact from price cost spread and a $6 million decline in business integration expenses.
|
Consumer Packaging North America
|
||||||||||||||||
|
Quarter
|
Prior Quarter
|
$ Change
|
% Change
|
|||||||||||||
|
Net sales
|
$
|
831
|
$
|
798
|
$
|
33
|
4
|
%
|
||||||||
|
Operating income
|
$
|
103
|
$
|
89
|
$
|
14
|
16
|
%
|
||||||||
Net sales: The net sales increase in the Consumer Packaging North America segment is primarily attributed to 2% organic volume growth and higher selling prices of $12 million as a result of improved product mix.
Operating income: The operating income increase is primarily attributed to a $7 million favorable impact from price cost spread and a favorable impact from organic volume growth.
|
Health, Hygiene & Specialties
|
||||||||||||||||
|
Quarter
|
Prior Quarter
|
$ Change
|
% Change
|
|||||||||||||
|
Net sales
|
$
|
647
|
$
|
657
|
$
|
(10
|
)
|
(2
|
)%
|
|||||||
|
Operating income
|
$
|
34
|
$
|
22
|
$
|
12
|
55
|
%
|
||||||||
Net sales: The net sales decline in the Health, Hygiene
& Specialties segment is primarily attributed to decreased selling prices of $17 million, partially offset by 2% organic volume growth.
Operating income: The operating income increase is primarily attributed to a $7 million decline in business integration expenses and a favorable impact from organic volume growth.
|
Flexibles
|
||||||||||||||||
|
Quarter
|
Prior Quarter
|
$ Change
|
% Change
|
|||||||||||||
|
Net sales
|
$
|
724
|
$
|
738
|
$
|
(14
|
)
|
(2
|
)%
|
|||||||
|
Operating income
|
$
|
87
|
$
|
88
|
$
|
(1
|
)
|
(1
|
)%
|
|||||||
Net sales: The net sales decline in the Flexibles
segment is primarily attributed to decreased selling prices of $28 million, partially offset by 2% organic volume growth.
Operating income: The operating income decrease is primarily attributed a $3 million increase in depreciation and amortization, partially offset by the favorable impact from organic volume growth.
Changes in Comprehensive Income
The $73 million decline in comprehensive income from the Prior Quarter is primarily attributed to a $86 million unfavorable change in currency translation and a $37 million unfavorable change in the fair
value of derivative instruments, net of tax, partially offset by a $50 million improvement in net income. Currency translation changes are primarily related to non-U.S. subsidiaries with a functional currency other than the U.S. dollar whereby assets and
liabilities are translated from the respective functional currency into U.S. dollars using period-end exchange rates. The change in currency translation in the Quarter was primarily attributed to locations utilizing the Euro and British pound sterling
as their functional currency. As part of the overall risk management, the Company uses derivative instruments to (i) reduce our exposure to changes in interest rates attributed to the Company’s borrowings and (ii) reduce foreign currency exposure to
translation of certain foreign operations. The Company records changes to the fair value of these instruments in Accumulated other comprehensive loss. The change in fair value of these instruments in fiscal 2024 versus fiscal 2023 is primarily attributed to the change in the
forward interest and foreign exchange curves between measurement dates.
Comparison of the Three Quarterly Periods Ended June 29, 2024 (the “YTD”) and the Three Quarterly Periods Ended July 1, 2023 (the “Prior YTD”)
Business integration expenses consist of restructuring and impairment charges, acquisition and divestiture related costs, and other business
optimization costs. Tables present dollars in millions.
|
Consolidated Overview
|
||||||||||||||||
|
YTD
|
Prior YTD
|
$ Change
|
% Change
|
|||||||||||||
|
Net sales
|
$
|
9,090
|
$
|
9,577
|
$
|
(487
|
)
|
(5
|
)%
|
|||||||
|
Cost of goods sold
|
7,448
|
7,873
|
(425
|
)
|
(5
|
)%
|
||||||||||
|
Other operating expenses
|
974
|
926
|
48
|
5
|
%
|
|||||||||||
|
Operating income
|
$
|
668
|
$
|
778
|
$
|
(110
|
)
|
(14
|
)%
|
|||||||
Net Sales: The net sales decline is primarily
attributed to decreased selling prices of $436 million due to the pass through of lower polymer costs and a 1% volume decline partially offset by a $79 million favorable impact from foreign currency changes.
Cost of goods sold: The cost of goods sold decrease is
primarily attributed to lower raw material prices and the volume decline, partially offset by foreign currency changes.
Other operating expenses: The other operating expenses increase is primarily attributed to a $57 million loss from divestitures and costs associated with the announced spin-off and merger of our HHNF business with GLT.
Operating Income: The operating income decrease is primarily attributed to a $21 million unfavorable impact from the volume decline, a $57 million loss from divestitures, a $34 million increase in depreciation and amortization expense, a $17 million unfavorable
impact from price cost spread and a $12 million unfavorable impact from hyperinflation in our Argentinian subsidiary, partially offset by a $13 million favorable impact from
foreign currency changes.
|
Consumer Packaging International
|
||||||||||||||||
|
YTD
|
Prior YTD
|
$ Change
|
% Change
|
|||||||||||||
|
Net sales
|
$
|
2,844
|
$
|
3,031
|
$
|
(187
|
)
|
(6
|
)%
|
|||||||
|
Operating income
|
$
|
113
|
$
|
190
|
$
|
(77
|
)
|
(41
|
)%
|
|||||||
Net sales: The net sales decline in the Consumer Packaging International segment is primarily attributed to decreased selling prices of $167 million, a 1% volume decline and a $40 million decline from divestures in the YTD partially offset by a $49 million favorable impact from foreign currency changes.
Operating income: The operating income decrease is primarily attributed to a $9 million decline from divestitures in the YTD, including a $57 million loss from those divestitures, a $10 million increase in
depreciation and amortization expense, and an $8 million unfavorable impact from price cost spread, partially offset by a $7 million favorable impact from foreign currency
changes.
|
Consumer Packaging North America
|
||||||||||||||||
|
YTD
|
Prior YTD
|
$ Change
|
% Change
|
|||||||||||||
|
Net sales
|
$
|
2,281
|
$
|
2,335
|
$
|
(54
|
)
|
(2
|
)%
|
|||||||
|
Operating income
|
$
|
243
|
$
|
253
|
$
|
(10
|
)
|
(4
|
)%
|
|||||||
Net sales: The net sales decline in the Consumer Packaging North America segment is primarily attributed to decreased selling prices of $45 million and a 2% volume decline due to general market softness, partially
offset by acquisition sales of $28 million.
Operating income: The operating income decrease is primarily attributed to an $8 million unfavorable impact from the volume decline and a $10 million increase in depreciation and amortization expense, partially
offset by earnings from the acquisition of F&S Tool.
|
Health, Hygiene & Specialties
|
||||||||||||||||
|
YTD
|
Prior YTD
|
$ Change
|
% Change
|
|||||||||||||
|
Net sales
|
$
|
1,896
|
$
|
1,997
|
$
|
(101
|
)
|
(5
|
)%
|
|||||||
|
Operating income
|
$
|
64
|
$
|
89
|
$
|
(25
|
)
|
(28
|
)%
|
|||||||
Net sales: The net sales decline in the Health, Hygiene
& Specialties segment is primarily attributed to decreased selling prices of $106 million and a 1% volume decline, partially offset by a $19 million favorable impact from
foreign currency changes.
Operating income: The operating income decrease is primarily attributed to a $16 million unfavorable impact from price cost spread and a $12 million unfavorable impact from hyperinflation in our Argentinian
subsidiary.
|
Flexibles
|
||||||||||||||||
|
YTD
|
Prior YTD
|
$ Change
|
% Change
|
|||||||||||||
|
Net sales
|
$
|
2,069
|
$
|
2,214
|
$
|
(145
|
)
|
(7
|
)%
|
|||||||
|
Operating income
|
$
|
248
|
$
|
246
|
$
|
2
|
1
|
%
|
||||||||
Net sales: The net sales decline in the Flexibles
segment is primarily attributed to decreased selling prices of $118 million and a 2% volume decline, partially offset by an $11 million favorable impact from foreign currency changes.
Operating income: The operating income increase is primarily attributed to a $13 million favorable impact from price cost spread partially offset by a $9 million increase in depreciation and amortization expense.
Changes in Comprehensive Income
The $337 million decline in comprehensive income from the Prior YTD was primarily attributed to a $218 million unfavorable change in currency translation, a $64 million unfavorable change in the fair
value of derivative instruments, net of tax, and a $55 million decline in net income. Currency translation changes are primarily related to non-U.S. subsidiaries with a functional currency other than the U.S. dollar whereby assets and liabilities are translated from the respective
functional currency into U.S. dollars using period-end exchange rates. The change in currency translation in the YTD was primarily attributed to locations utilizing the Euro and British pound sterling as their functional currency. As part of the
overall risk management, the Company uses derivative instruments to (i) reduce our exposure to changes in interest rates attributed to the Company’s borrowings and (ii) reduce foreign currency exposure to translation of certain foreign operations. The
Company records changes to the fair value of these instruments in Accumulated other comprehensive loss. The change in fair value of these instruments in fiscal 2024 versus fiscal 2023 is primarily attributed to the change in the forward interest and foreign exchange
curves between measurement dates.
Liquidity and Capital Resources
Senior Secured Credit Facility
We manage our global cash requirements considering (i) available funds among the many subsidiaries through which we conduct business, (ii) the geographic
location of our liquidity needs, and (iii) the cost to access international cash balances. At the end of the Quarter, the Company had no
outstanding balance on its $1,000 million asset-based revolving line of credit that matures in June 2028. The Company was in compliance with all
covenants at the end of the Quarter.
Cash Flows
Net cash from operating activities decreased $193
million from the Prior YTD primarily attributed to higher working capital partially offset by a decline in net income prior to non-cash activities.
Net cash from investing activities decreased $154
million from the Prior YTD primarily attributed to the proceeds from business divestitures in the YTD and a decrease in capital spend.
Net cash from financing activities decreased $165 million from the Prior YTD primarily attributed to lower share repurchases partially offset by higher repayments of long-term debt in the YTD.
Dividend Payments
The Company declared and paid a cash dividend of $0.275 per share during each of the first three quarters of fiscal 2024.
Share Repurchases
YTD fiscal 2024, the Company repurchased
approximately 2.0 million shares for $117
million. Authorized share repurchases of $324 million remain available to the Company.
Free Cash Flow
Our consolidated free cash flow for the YTD and Prior YTD are summarized as follows:
|
June 29, 2024
|
July 1, 2023
|
|||||||
|
Cash flow from operating activities
|
$
|
297
|
$
|
490
|
||||
|
Additions to property, plant and equipment, net
|
(473
|
)
|
(560
|
)
|
||||
|
Free cash flow
|
$
|
(176
|
)
|
$
|
(70
|
)
|
||
We use free cash flow as a supplemental measure of liquidity as it assists us in assessing our ability to fund growth through generation of cash. Free cash
flow may be calculated differently by other companies, including other companies in our industry or peer group, limiting its usefulness on a comparative basis. Free cash flow is not a financial measure presented in accordance with generally accepted
accounting principles ("GAAP") and should not be considered as an alternative to any other measure determined in accordance with GAAP.
Liquidity Outlook
At June 29, 2024, our cash balance was $509 million, which was primarily located outside the U.S. We believe our existing U.S. based cash and cash flow from U.S. operations, together with
available borrowings under our senior secured credit facilities, will be adequate to meet our short-term and long-term liquidity needs with the exception of funds needed to cover all long-term debt obligations, which we intend to refinance prior to
maturity. The Company has the ability to repatriate the cash located outside the U.S. to the extent not needed to meet operational and capital needs without significant restrictions.
Summarized Guarantor Financial Information
Berry Global, Inc. (“Issuer”) has notes outstanding which are fully, jointly, severally, and unconditionally guaranteed by its parent, Berry Global Group, Inc.
(for purposes of this section, “Parent”) and substantially all of Issuer’s domestic subsidiaries. Separate narrative information or financial statements of the guarantor subsidiaries have not been included because they are 100% owned by Parent and the
guarantor subsidiaries unconditionally guarantee such debt on a joint and several basis. A guarantee of a guarantor subsidiary of the securities will terminate upon the following customary circumstances: the sale of the capital stock of such guarantor
if such sale complies with the indentures, the designation of such guarantor as an unrestricted subsidiary, the defeasance or discharge of the indenture or in the case of a restricted subsidiary that is required to guarantee after the relevant issuance
date, if such guarantor no longer guarantees certain other indebtedness of Issuer. The guarantees of the guarantor subsidiaries are also limited as necessary to prevent them from constituting a fraudulent conveyance under applicable law and any
guarantees guaranteeing subordinated debt are subordinated to certain other of the Company’s debts. Parent also guarantees Issuer’s term loans and revolving credit facilities. The guarantor subsidiaries guarantee our term loans and are co-borrowers
under our revolving credit facility.
Presented below is summarized financial information for the Parent, Issuer and guarantor subsidiaries on a combined basis, after intercompany transactions have
been eliminated.
|
Three Quarterly Periods Ended
|
||||
|
June 29, 2024
|
||||
|
Net sales
|
$
|
4,815
|
||
|
Gross profit
|
981
|
|||
|
Earnings from continuing operations
|
359
|
|||
|
Net income
|
$
|
359
|
||
Includes $6 million of income associated with
intercompany activity with non-guarantor subsidiaries.
|
June 29, 2024
|
September 30, 2023
|
|||||||
|
Assets
|
||||||||
|
Current assets
|
$
|
1,485
|
$
|
1,975
|
||||
|
Noncurrent assets
|
5,903
|
5,997
|
||||||
|
Liabilities
|
||||||||
|
Current liabilities
|
$
|
1,010
|
$
|
1,363
|
||||
|
Intercompany payable
|
799
|
754
|
||||||
|
Noncurrent liabilities
|
9,970
|
10,271
|
||||||
Interest Rate Risk
We are exposed to market risk from changes in interest rates primarily through our senior secured credit facilities and accounts receivable supply chain finance
factoring programs. Our senior secured credit facilities are comprised of (i) $2.0 billion term loans and (ii) a $1.0 billion revolving credit facility with no
borrowings outstanding. Borrowings under our senior secured credit facilities bear interest at a rate equal to an applicable margin plus SOFR. The applicable margin for SOFR rate borrowings under the revolving credit facility ranges from 1.25% to 1.50%, and the margin for the term
loans is 1.75% per annum. As of period end, the SOFR rate of approximately 5.33% was applicable to the term loans. A change of 0.25% on these floating interest rate exposures would increase our annual interest expense by approximately $3 million.
We seek to minimize interest rate volatility risk through regular operating and financing activities and, when deemed appropriate, through the use of derivative
financial instruments. These financial instruments are not used for trading or other speculative purposes. (See Note 8.)
Foreign Currency Risk
As a global company, we face foreign currency risk exposure from fluctuating currency exchange rates, primarily the U.S. dollar against the euro, British pound
sterling, Brazilian real, Chinese renminbi, Canadian dollar and Mexican peso. Significant fluctuations in currency rates can have a substantial impact, either positive or negative, on our revenue, cost of sales, and operating expenses. Currency
translation gains and losses are primarily related to non-U.S. subsidiaries with a functional currency other than U.S. dollars whereby assets and liabilities are translated from the respective functional currency into U.S. dollars using period-end
exchange rates and impact our Comprehensive income. A 10% decline in foreign currency exchange rates would have had a $9 million unfavorable
impact on our Net income for the three quarterly periods ended June 29, 2024. (See Note 8.)
(a) Evaluation of disclosure controls and procedures.
Under applicable Securities and Exchange Commission regulations, management of a reporting company, with the participation of the principal executive officer
and principal financial officer, must periodically evaluate the company’s “disclosure controls and procedures,” which are defined generally as controls and other procedures of a reporting company designed to ensure that information required to be
disclosed by the reporting company in its periodic reports filed with the commission (such as this Form 10-Q) is recorded, processed, summarized, and reported on a timely basis.
The Company’s management, with the participation of the Chief Executive Officer and the Chief Financial Officer, carried out an evaluation of the effectiveness
of the design and operation of the disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the design and operation of our
disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period covered by this report.
(b) Changes in internal control over financial reporting.
There were no changes in our internal control over financial reporting that occurred during the Quarter that have materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.
Part II. Other Information
There have been no material changes in legal proceedings from the items disclosed in our most recent Form 10-K filed with the Securities and Exchange
Commission.
Before investing in our securities, we recommend that investors carefully consider the risks described in our most recent Form 10-K and subsequent periodic
reports filed with the Securities and Exchange Commission, including those under the heading “Risk Factors” and other information contained in this Quarterly Report. Realization of any of these risks could have a material adverse effect on our
business, financial condition, cash flows and results of operations.
Additionally, we caution readers that the list of risk factors discussed in our
most recent Form 10-K and subsequent periodic reports may not contain all of the material factors that are important to you. In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements
contained in this report may not in fact occur. Accordingly, readers should not place undue reliance on those statements.
Issuer Repurchases of Equity Securities
The following table summarizes the Company's repurchases of its common stock during the Quarterly Period ended June 29, 2024.
|
Fiscal Period
|
Total Number of
Shares Purchased
|
Average Price
Paid Per Share
|
Total Number of Shares
Purchased as Part of Publicly
Announced Programs
|
Dollar Value of Shares that
May Yet be Purchased Under
the Program (in millions) (a)
|
||||||||||||
|
April
|
390,402
|
$
|
58.87
|
390,402
|
$
|
331
|
||||||||||
|
May
|
22,500
|
58.40
|
22,500
|
329
|
||||||||||||
|
June
|
80,148
|
58.99
|
80,148
|
324
|
||||||||||||
|
Total
|
493,050
|
$
|
58.87
|
493,050
|
$
|
324
|
||||||||||
| (a) |
All open market purchases during the quarter were made under the 2023 authorization from our board of directors.
|
Rule 10b5-1 Plan Elections
During the third quarter of fiscal 2024, none of our directors or officers informed us of the adoption or termination
On May 28, 2024 , Director Evan Bayh adopted a new 10b5-1 trading arrangement providing for the sale from time to time of up to 14,000 shares of the Company's common stock issuable upon exercise of vested options between and November 28, 2024 . The trading arrangement is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act.
|
Exhibit No.
|
Description of Exhibit
|
|
|
Indenture, dated May 28, 2024, among Berry Global, Inc., certain guarantors party thereto, U.S. Bank Trust Company, National Association, as Trustee and
Collateral Agent, relating to the 5.800% First Priority Senior Secured Notes due 2031 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on May 28, 2024).
|
||
|
Registration Rights Agreement, dated May 28, 2024, by and among Berry Global, Inc., Berry Global Group, Inc., each subsidiary of Berry Global, Inc.
identified therein, and Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC and Wells Fargo Securities, LLC, on behalf of themselves and as representatives of the initial purchasers, relating to the 5.800% First Priority Senior Secured
Notes due 2031 (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on May 28, 2024).
|
||
|
22.1*
|
Subsidiary Guarantors.
|
|
|
31.1*
|
Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer.
|
|
|
31.2*
|
Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer.
|
|
|
32.1**
|
Section 1350 Certification of the Chief Executive Officer.
|
|
|
32.2**
|
Section 1350 Certification of the Chief Financial Officer.
|
|
|
101.INS
|
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline
XBRL document).
|
|
|
101.SCH
|
Inline XBRL Taxonomy Extension Schema Document.
|
|
|
101.CAL
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
101.DEF
|
Inline XBRL Taxonomy Extension Definition Linkbase Document.
|
|
|
101.LAB
|
Inline XBRL Taxonomy Extension Label Linkbase Document.
|
|
|
101.PRE
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
|
104
|
Cover Page Interactive Date File (formatted as Inline XBRL and contained in Exhibit 101).
|
| * |
Filed herewith
|
| ** |
Furnished herewith
|
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
|
Berry Global Group, Inc.
|
|||
|
August 2, 2024
|
By:
|
/s/ Mark W. Miles
|
|
|
Mark W. Miles
|
|||
|
Chief Financial Officer
|
|||