Washington, D.C. 20549
BERRY GLOBAL GROUP, INC.
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“large accelerated filer," "accelerated” “accelerated filer," "smaller” “smaller reporting company,"” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act.
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 ☒
Berry Global Group, Inc.
Part I. Financial Information
See notes to consolidated financial statements.
See notes to consolidated financial statements.
See notes to consolidated financial statements.
See notes to consolidated financial statements.
Cross-Currency Swaps
The Company is party to certain cross-currency swaps to hedge a portion of our foreign currency risk. The swap agreements mature May 2022 (€250 million), June 2024 (€1,625 million) and July 2027 (£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 27, 2020,April 3, 2021, we had outstanding long-term debt of €785 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).
During fiscal 2020, the Company entered into transactions to cash settle existing cross-currency swaps and received proceeds of $281 million. The swap settlement impact has been included as a component of Currency translation within Accumulated other comprehensive loss. Following the settlement of the existing cross-currency swaps, we entered into new cross-currency swaps with matching notional amounts and maturity dates of the original swaps.
Interest Rate Swaps
The primary purpose of the Company’s interest rate swap activities is to manage interest expense variability associated with our outstanding variable rate term loan debt. When valuing interest rate swaps the Company utilizes Level 2 inputs (substantially observable).
As of June 27, 2020,April 3, 2021, the Company effectively had (i) a $450 million interest rate swap transaction that swaps a one-month variable LIBOR contract for a fixed annual rate of 1.398%, with an expiration in June 2026, (ii) a $1 billion interest rate swap transaction that swaps a one-month variable LIBOR contract for a fixed annual rate of 1.835% with an expiration in June 2026, (iii) a $400 million interest rate swap transaction that swaps a one-month variable LIBOR contract for a fixed annual rate of 1.916% with an expiration in June 2026, (iv) a $884 million interest rate swap transaction that swaps a one-month variable LIBOR contract for a fixed annual rate of 1.857%, with an expiration in June 2024, and (v) a $473 million interest rate swap transaction that swaps a one-month variable LIBOR contract for a fixed annual rate of 2.050%, with an expiration in June 2024.
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 27, 2020 | | | September 28, 2019 | | Hedge Designation | Balance Sheet Location | | April 3, 2021 | | | September 26, 2020 | |
Cross-currency swaps | Designated | Other assets | | $ | — | | | $ | 88 | | Designated | Other long-term liabilities | | $ | 423 | | | $ | 270 | |
Cross-currency swaps | Designated | Other long-term liabilities | | | 153 | | | | — | | |
Interest rate swaps | Designated | Other long-term liabilities | | | 228 | | | | 81 | | Designated | Other long-term liabilities | | | 138 | | | | 226 | |
The effect of the Company'sCompany’s derivative instruments on the Consolidated Statements of Income is as follows:
| | Quarterly Period Ended | | | Three Quarterly Periods Ended | | | Quarterly Period Ended | | | Two Quarterly Periods Ended | |
Derivative Instruments | Statements of Income Location | | June 27, 2020 | | | June 29, 2019 | | | June 27, 2020 | | | June 29, 2019 | | Statements of Income Location | | April 3, 2021 | | | March 28, 2020 | | | April 3, 2021 | | | March 28, 2020 | |
Cross-currency swaps | Interest expense, net | | $ | (2 | ) | | $ | (2 | ) | | $ | (5 | ) | | $ | (5 | ) | Interest expense, net | | $ | (1 | ) | | $ | (1 | ) | | $ | (4 | ) | | $ | (3 | ) |
Cross-currency swaps | Other expense, net | | | — | | | | 18 | | | | — | | | | 18 | | |
Foreign exchange forward contracts | Other expense, net | | | — | | | | 120 | | | | — | | | | 138 | | |
Interest rate swaps | Interest expense, net | | | 13 | | | | (4 | ) | | | 17 | | | | (13 | ) | Interest expense, net | | | 17 | | | | 17 | | | | 34 | | | | 34 | |
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 20192020 assessment. WhileNo impairment indicators were not identified duringin the quarter that warranted impairment testing, the ongoing COVID-19 pandemic has created market volatility which we believe is short-term in nature. However, if we experience sustained declines in valuation market multiples, sustained lower earnings, or escalating macroeconomic challenges, the need for future impairment tests may arise.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 27, 2020April 3, 2021 and September 28, 2019,26, 2020, along with the impairment loss recognized on the fair value measurement during the period:
| | As of June 27, 2020 | | | As of April 3, 2021 | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | | | Impairment | | | Level 1 | | | Level 2 | | | Level 3 | | | Total | | | Impairment | |
Indefinite-lived trademarks | | $ | — | | | $ | — | | | $ | 248 | | | $ | 248 | | | $ | — | | | $ | 0 | | | $ | 0 | | | $ | 248 | | | $ | 248 | | | $ | 0 | |
Goodwill | | | — | | | | — | | | | 5,184 | | | | 5,184 | | | | — | | | | 0 | | | | 0 | | | | 5,229 | | | | 5,229 | | | | 0 | |
Definite lived intangible assets | | | — | | | | — | | | | 2,288 | | | | 2,288 | | | | — | | | | 0 | | | | 0 | | | | 2,149 | | | | 2,149 | | | | 0 | |
Property, plant, and equipment | | | — | | | | — | | | | 4,481 | | | | 4,481 | | | | 2 | | | | 0 | | | | 0 | | | | 4,675 | | | | 4,675 | | | | 2 | |
Total | | $ | — | | | $ | — | | | $ | 12,201 | | | $ | 12,201 | | | $ | 2 | | | $ | 0 | | | $ | 0 | | | $ | 12,301 | | | $ | 12,301 | | | $ | 2 | |
| | As of September 28, 2019 | | | As of September 26, 2020 | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | | | Impairment | | | Level 1 | | | Level 2 | | | Level 3 | | | Total | | | Impairment | |
Indefinite-lived trademarks | | $ | — | | | $ | — | | | $ | 248 | | | $ | 248 | | | $ | — | | | $ | 0 | | | $ | 0 | | | $ | 248 | | | $ | 248 | | | $ | 0 | |
Goodwill | | | — | | | | — | | | | 5,051 | | | | 5,051 | | | | — | | | | 0 | | | | 0 | | | | 5,173 | | | | 5,173 | | | | 0 | |
Definite lived intangible assets | | | — | | | | — | | | | 2,532 | | | | 2,532 | | | | — | | | | 0 | | | | 0 | | | | 2,249 | | | | 2,249 | | | | 0 | |
Property, plant, and equipment | | | — | | | | — | | | | 4,714 | | | | 4,714 | | | | 8 | | | | 0 | | | | 0 | | | | 4,561 | | | | 4,561 | | | | 2 | |
Total | | $ | — | | | $ | — | | | $ | 12,545 | | | $ | 12,545 | | | $ | 8 | | | $ | 0 | | | $ | 0 | | | $ | 12,231 | | | $ | 12,231 | | | $ | 2 | |
The Company'sCompany’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 bookfair value of our marketable long-term indebtedness exceeded fairbook value by $31$101 million as of June 27, 2020.April 3, 2021. The Company'sCompany’s long-term debt fair values were determined using Level 2 inputs as other significant observable inputs were not available.(substantially observable).
9. Income Taxes
In comparison to the statutory rate, the higher effective tax rate for the quarter and year-to-date was modestlynegatively impacted by U.S. state income taxes,divestitures and global intangible low-taxed income provisions (GILTI), uncertain tax positions and other discrete items.provisions.
10. Segment and Geographic Data
The Company'sCompany’s operations are organized into 4 reporting segments: Consumer Packaging International, Consumer Packaging North America, Engineered Materials, and Health, Hygiene & Specialties. The structure is designed to align us with our customers, provide optimal service, drive future growth, and to facilitate synergies realization.In October 2020, the Company realigned portions of our operating segments. As a result of these organizational realignments, we have recast prior period segment amounts resulting in the following Net sales movements for the two quarterly periods ended March 28, 2020: (1.) Tapes business: $138 million from Engineered Materials to Health, Hygiene & Specialties, (2.) North American Healthcare: $142 million from Consumer Packaging North America to Consumer Packaging International and (3.) European Films: $347 million from Consumer Packaging International to Engineered Materials.
Selected information by reportable segment is presented in the following tables:
| | Quarterly Period Ended | | | Three Quarterly Periods Ended | | | Quarterly Period Ended | | | Two Quarterly Periods Ended | |
| | June 27, 2020 | | | June 29, 2019 | | | June 27, 2020 | | | June 29, 2019 | | | April 3, 2021 | | | March 28, 2020 | | | April 3, 2021 | | | March 28, 2020 | |
Net sales: | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer Packaging International | | $ | 1,020 | | | $ | 52 | | | $ | 3,125 | | | $ | 153 | | | $ | 1,060 | | | $ | 970 | | | $ | 2,048 | | | $ | 1,900 | |
Consumer Packaging North America | | | 718 | | | | 652 | | | | 2,104 | | | | 1,892 | | | | 731 | | | | 633 | | | | 1,417 | | | | 1,244 | |
Health, Hygiene & Specialties | | | | 781 | | | | 644 | | | | 1,521 | | | | 1,254 | |
Engineered Materials | | | 564 | | | | 630 | | | | 1,747 | | | | 1,910 | | | | 798 | | | | 728 | | | | 1,520 | | | | 1,393 | |
Health, Hygiene & Specialties | | | 608 | | | | 603 | | | | 1,725 | | | | 1,904 | | |
Total net sales | | $ | 2,910 | | | $ | 1,937 | | | $ | 8,701 | | | $ | 5,859 | | | $ | 3,370 | | | $ | 2,975 | | | $ | 6,506 | | | $ | 5,791 | |
Operating income: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer Packaging International | | $ | 89 | | | $ | (1 | ) | | $ | 195 | | | $ | (2 | ) | | $ | 59 | | | $ | 53 | | | $ | 135 | | | $ | 96 | |
Consumer Packaging North America | | | 93 | | | | 73 | | | | 226 | | | | 168 | | | | 77 | | | | 69 | | | | 136 | | | | 113 | |
Health, Hygiene & Specialties | | | | 114 | | | | 66 | | | | 210 | | | | 113 | |
Engineered Materials | | | 81 | | | | 83 | | | | 239 | | | | 250 | | | | 83 | | | | 96 | | | | 156 | | | | 161 | |
Health, Hygiene & Specialties | | | 84 | | | | 60 | | | | 170 | | | | 160 | | |
Total operating income | | $ | 347 | | | $ | 215 | | | $ | 830 | | | $ | 576 | | | $ | 333 | | | $ | 284 | | | $ | 637 | | | $ | 483 | |
Depreciation and amortization: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer Packaging International | | $ | 79 | | | $ | 4 | | | $ | 240 | | | $ | 12 | | | $ | 87 | | | $ | 79 | | | $ | 170 | | | $ | 161 | |
Consumer Packaging North America | | | 62 | | | | 50 | | | | 190 | | | | 156 | | | | 54 | | | | 60 | | | | 111 | | | | 116 | |
Health, Hygiene & Specialties | | | | 42 | | | | 46 | | | | 87 | | | | 93 | |
Engineered Materials | | | 25 | | | | 27 | | | | 80 | | | | 87 | | | | 29 | | | | 28 | | | | 59 | | | | 59 | |
Health, Hygiene & Specialties | | | 43 | | | | 46 | | | | 128 | | | | 142 | | |
Total depreciation and amortization | | $ | 209 | | | $ | 127 | | | $ | 638 | | | $ | 397 | | | $ | 212 | | | $ | 213 | | | $ | 427 | | | $ | 429 | |
Selected information by geographical region is presented in the following tables:
| | Quarterly Period Ended | | | Three Quarterly Periods Ended | | | Quarterly Period Ended | | | Two Quarterly Periods Ended | |
| | June 27, 2020 | | | June 29, 2019 | | | June 27, 2020 | | | June 29, 2019 | | | April 3, 2021 | | | March 28, 2020 | | | April 3, 2021 | | | March 28, 2020 | |
Net sales: | | | | | | | | | | | | | | | | | | | | | | | | |
United States and Canada | | $ | 1,430 | | | $ | 1,556 | | | $ | 4,648 | | | $ | 4,672 | | | $ | 1,728 | | | $ | 1,705 | | | $ | 3,405 | | | $ | 3,218 | |
Europe | | | 1,172 | | | | 200 | | | | 3,156 | | | | 614 | | | | 1,257 | | | | 981 | | | | 2,350 | | | | 1,984 | |
Rest of world | | | 308 | | | | 181 | | | | 897 | | | | 573 | | | | 385 | | | | 289 | | | | 751 | | | | 589 | |
Total net sales | | $ | 2,910 | | | $ | 1,937 | | | $ | 8,701 | | | $ | 5,859 | | | $ | 3,370 | | | $ | 2,975 | | | $ | 6,506 | | | $ | 5,791 | |
Selected information by product line is presented in the following tables:
| | Quarterly Period Ended | | | Three Quarterly Periods Ended | | | Quarterly Period Ended | | | Two Quarterly Periods Ended | |
| | June 27, 2020 | | | June 29, 2019 | | | June 27, 2020 | | | June 29, 2019 | | | April 3, 2021 | | | March 28, 2020 | | | April 3, 2021 | | | March 28, 2020 | |
Net sales: | | | | | | | | | | | | | | | | | | | | | | | | |
Packaging | | | 84 | | | | 100 | | | | 82 | | | | 100 | | | | 81 | | | | 83 | | | | 81 | | | | 83 | |
Non-packaging | | | 16 | | | | — | | | | 18 | | | | — | | | | 19 | | | | 17 | | | | 19 | | | | 17 | |
Consumer Packaging International | | | 100 | % | | | 100 | % | | | 100 | % | | | 100 | % | | | 100 | % | | | 100 | % | | | 100 | % | | | 100 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Rigid Open Top | | | 44 | | | | 47 | | | | 45 | | | | 45 | | | | 54 | | | | 55 | | | | 55 | | | | 56 | |
Rigid Closed Top | | | 56 | | | | 53 | | | | 55 | | | | 55 | | | | 46 | | | | 45 | | | | 45 | | | | 44 | |
Consumer Packaging North America | | | 100 | % | | | 100 | % | | | 100 | % | | | 100 | % | | | 100 | % | | | 100 | % | | | 100 | % | | | 100 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Core Films | | | 38 | | | | 40 | | | | 38 | | | | 40 | | |
Retail & Industrial | | | 62 | | | | 60 | | | | 62 | | | | 60 | | |
Engineered Materials | | | 100 | % | | | 100 | % | | | 100 | % | | | 100 | % | |
| | | | | | | | | | | | | | | | | |
Health | | | 22 | | | | 15 | | | | 19 | | | | 15 | | | | 19 | | | | 15 | | | | 19 | | | | 14 | |
Hygiene | | | 52 | | | | 52 | | | | 53 | | | | 54 | | | | 45 | | | | 47 | | | | 45 | | | | 48 | |
Specialties | | | 26 | | | | 33 | | | | 28 | | | | 31 | | | | 36 | | | | 38 | | | | 36 | | | | 38 | |
Health, Hygiene & Specialties | | | 100 | % | | | 100 | % | | | 100 | % | | | 100 | % | | | 100 | % | | | 100 | % | | | 100 | % | | | 100 | % |
| | | | | | | | | | | | | | | | | |
Core Films | | | | 64 | | | | 63 | | | | 61 | | | | 61 | |
Retail & Industrial | | | | 36 | | | | 37 | | | | 39 | | | | 39 | |
Engineered Materials | | | | 100 | % | | | 100 | % | | | 100 | % | | | 100 | % |
11. Contingencies and Commitments
The Company is party to various legal proceedings involving routine claims which are incidental to its business. Although the Company'sCompany’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 statements.
The Company has various purchase commitments for raw materials, supplies, and property and equipment incidental to the ordinary conduct of business.
12. Share Repurchase Program
NaN shares were repurchased during the threetwo quarterly periods ended June 27, 2020.April 3, 2021. Authorized share repurchases of $393 million remain available to the Company.
13. Basic and Diluted Net Income Per Share
Basic net income per share 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 net income per share is calculated by dividing the net income attributable to common stockholders by the weighted-average number of common share equivalents outstanding for the period determined using the treasury-stock method and the if-converted method. For purposes of this calculation, stock options are considered to be common stock equivalents and are only included in the calculation of diluted net income per share when their effect is dilutive. For the three and ninesix months ended June 27, 2020, 7.1April 3, 2021, million and 7.13.2 million shares respectively, were excluded from the diluted net income per share calculation as their effect would be anti-dilutive. NaN shares were excluded from the diluted net income per share calculation for the three months ended April 3, 2021. For the three and six months ended March 28, 2020, 7.1 million and 7.1 million shares, respectively, were excluded.
The following tables provide a reconciliation of the numerator and denominator of the basic and diluted net income per share calculations.
| | Quarterly Period Ended | | | Three Quarterly Periods Ended | | | Quarterly Period Ended | | | Two Quarterly Periods Ended | |
(in millions, except per share amounts) | | June 27, 2020 | | | June 29, 2019 | | | June 27, 2020 | | | June 29, 2019 | | | April 3, 2021 | | | March 28, 2020 | | | April 3, 2021 | | | March 28, 2020 | |
Numerator | | | | | | | | | | | | | | | | | | | | | | | | |
Consolidated net income | | $ | 191 | | | $ | 13 | | | $ | 364 | | | $ | 175 | | | $ | 181 | | | $ | 126 | | | $ | 311 | | | $ | 173 | |
Denominator | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Weighted average common shares outstanding - basic | | | 132.5 | | | | 131.5 | | | | 132.4 | | | | 131.0 | | | | 134.3 | | | | 132.4 | | | | 133.9 | | | | 132.4 | |
Dilutive shares | | | 1.7 | | | | 2.7 | | | | 1.9 | | | | 3.0 | | | | 2.5 | | | | 1.7 | | | | 2.7 | | | | 1.8 | |
Weighted average common and common equivalent shares outstanding - diluted | | | 134.2 | | | | 134.2 | | | | 134.3 | | | | 134.0 | | | | 136.8 | | | | 134.1 | | | | 136.6 | | | | 134.2 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Per common share income | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic | | $ | 1.44 | | | $ | 0.10 | | | $ | 2.75 | | | $ | 1.34 | | | $ | 1.35 | | | $ | 0.95 | | | $ | 2.32 | | | $ | 1.31 | |
Diluted | | $ | 1.42 | | | $ | 0.10 | | | $ | 2.71 | | | $ | 1.31 | | | $ | 1.32 | | | $ | 0.94 | | | $ | 2.28 | | | $ | 1.29 | |
14. 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 28, 2020 | | $ | (344 | ) | | $ | (57 | ) | | $ | (147 | ) | | $ | (548 | ) |
Other comprehensive income (loss), net of tax before reclassifications | | | 11 | | | | — | | | | (23 | ) | | | (12 | ) |
Net amount reclassified from accumulated other comprehensive loss | | | — | | | | — | | | | 10 | | | | 10 | |
Balance at June 27, 2020 | | $ | (333 | ) | | $ | (57 | ) | | $ | (160 | ) | | $ | (550 | ) |
Quarterly Period Ended | | Currency Translation | | | Defined Benefit Pension and Retiree Health Benefit Plans | | | Derivative Instruments | | | Accumulated Other Comprehensive Loss | |
Balance at January 2, 2021 | | $ | (100 | ) | | $ | (116 | ) | | $ | (140 | ) | | $ | (356 | ) |
Other comprehensive income (loss) before reclassifications | | | (73 | ) | | | 0 | | | | 52 | | | | (21 | ) |
Net amount reclassified from accumulated other comprehensive loss | | | 0 | | | | 0 | | | | 2 | | | | 2 | |
Balance at April 3, 2021 | | $ | (173 | ) | | $ | (116 | ) | | $ | (86 | ) | | $ | (375 | ) |
| | Currency Translation | | | Defined Benefit Pension and Retiree Health Benefit Plans | | | Derivative Instruments | | | Accumulated Other Comprehensive Loss | |
Balance at March 30, 2019 | | $ | (173 | ) | | $ | (13 | ) | | $ | — | | | $ | (186 | ) |
Other comprehensive income (loss), net of tax before reclassifications | | | 10 | | | | — | | | | (32 | ) | | | (22 | ) |
Net amount reclassified from accumulated other comprehensive loss | | | — | | | | — | | | | (3 | ) | | | (3 | ) |
Balance at June 29, 2019 | | $ | (163 | ) | | $ | (13 | ) | | $ | (35 | ) | | $ | (211 | ) |
| | Currency Translation | | | Defined Benefit Pension and Retiree Health Benefit Plans | | | Derivative Instruments | | | Accumulated Other Comprehensive Loss | |
Balance at December 28, 2019 | | $ | (187 | ) | | $ | (56 | ) | | $ | (38 | ) | | $ | (281 | ) |
Other comprehensive loss before reclassifications | | | (157 | ) | | | (1 | ) | | | (144 | ) | | | (302 | ) |
Net amount reclassified from accumulated other comprehensive loss | | | 0 | | | | 0 | | | | 35 | | | | 35 | |
Balance at March 28, 2020 | | $ | (344 | ) | | $ | (57 | ) | | $ | (147 | ) | | $ | (548 | ) |
Three Quarterly Periods Ended | | Currency Translation | | | Defined Benefit Pension and Retiree Health Benefit Plans | | | Derivative Instruments | | | Accumulated Other Comprehensive Loss | |
Balance at September 28, 2019 | | $ | (279 | ) | | $ | (56 | ) | | $ | (51 | ) | | $ | (386 | ) |
Other comprehensive loss, net of tax before reclassifications | | | (54 | ) | | | (1 | ) | | | (126 | ) | | | (181 | ) |
Net amount reclassified from accumulated other comprehensive loss | | | — | | | | — | | | | 17 | | | | 17 | |
Balance at June 27, 2020 | | $ | (333 | ) | | $ | (57 | ) | | $ | (160 | ) | | $ | (550 | ) |
Two Quarterly Periods Ended | | Currency Translation | | | Defined Benefit Pension and Retiree Health Benefit Plans | | | Derivative Instruments | | | Accumulated Other Comprehensive Loss | |
Balance at September 26, 2020 | | $ | (278 | ) | | $ | (116 | ) | | $ | (157 | ) | | $ | (551 | ) |
Other comprehensive income before reclassifications | | | 105 | | | | 0 | | | | 67 | | | | 172 | |
Net amount reclassified from accumulated other comprehensive loss | | | 0 | | | | 0 | | | | 4 | | | | 4 | |
Balance at April 3, 2021 | | $ | (173 | ) | | $ | (116 | ) | | $ | (86 | ) | | $ | (375 | ) |
| | Currency Translation | | | Defined Benefit Pension and Retiree Health Benefit Plans | | | Derivative Instruments | | | Accumulated Other Comprehensive Loss | |
Balance at September 29, 2018 | | $ | (175 | ) | | $ | (13 | ) | | $ | 32 | | | $ | (156 | ) |
Other comprehensive income (loss), net of tax before reclassifications | | | 12 | | | | — | | | | (59 | ) | | | (47 | ) |
Net amount reclassified from accumulated other comprehensive loss | | | — | | | | — | | | | (8 | ) | | | (8 | ) |
Balance at June 29, 2019 | | $ | (163 | ) | | $ | (13 | ) | | $ | (35 | ) | | $ | (211 | ) |
| | Currency Translation | | | Defined Benefit Pension and Retiree Health Benefit Plans | | | Derivative Instruments | | | Accumulated Other Comprehensive Loss | |
Balance at September 28, 2019 | | $ | (279 | ) | | $ | (56 | ) | | $ | (51 | ) | | $ | (386 | ) |
Other comprehensive loss before reclassifications | | | (65 | ) | | | (1 | ) | | | (148 | ) | | | (214 | ) |
Net amount reclassified from accumulated other comprehensive loss | | | 0 | | | | 0 | | | | 52 | | | | 52 | |
Balance at March 28, 2020 | | $ | (344 | ) | | $ | (57 | ) | | $ | (147 | ) | | $ | (548 | ) |
Item 2. Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the consolidated financial statements of Berry Global Group, Inc. and its subsidiaries and the accompanying notes thereto, which information is included elsewhere herein. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in our most recent Form 10-K in the section titled "Risk Factors", Item 1A of the our Quarterly Report on Form 10-Q for the quarter ended March 28, 2020, and other risk factors identified from time to time in our subsequent periodic filings with the Securities and Exchange Commission. As a result, our actual results may differ materially from those contained in any forward-looking statements. The forward-looking statements referenced within this report should be read with the explanation of the qualifications and limitations included herein. Fiscal 2019 and fiscal 2020 are fifty-two week periods.
Executive Summary
COVID-19. The ongoing pandemic has impacted various businesses and supply chains, including travel restrictions and the extended shutdown of certain industries in various countries. Due to the nature of the majority of our products, geographic footprint and end market diversity, on a consolidated net sales basis we have been modestly impacted with lower customer demand in food service and industrials being offset by higher consumer demand in our healthcare, hygiene and food product categories. Additionally, the impact of travel and safety restriction related to the pandemic has negatively impacted various integration activities and back office functions. The Company will continue to evaluate the potential impacts and closely monitor developments as they arise.
Business. The Company'sCompany’s operations are organized into four reportingoperating segments: Consumer Packaging International, Consumer Packaging North America, Engineered Materials and Health, Hygiene & Specialties.Specialties, and Engineered Materials in order to better align our various businesses for future growth. The structure is designed to align us with our customers, provide optimalimproved service, drive future growth, and to facilitate synergies realization. The Consumer Packaging International segment primarily consists of containers, closures, dispensing systems, pharmaceutical devices and packaging, polythene films, and technical components and includes the international portion of the recently acquired RPC Group Plc (“RPC”) business.components. The Consumer Packaging North America segment primarily consists of containers, foodservice items, closures, overcaps, bottles, prescription vials, and tubes. The Engineered Materials segment primarily consists of tapes and adhesives, polyethylene-based film products, can liners, and specialty coated and laminated products. The Health, Hygiene & Specialties segment primarily consists of nonwoven specialty materials, tapes and adhesives, and films used in hygiene, infection prevention, personal care, industrial, construction, and filtration applications. The Engineered Materials segment primarily consists of polyethylene-based film products, and can liners.
Acquisitions.Acquisitions and Dispositions. Our acquisition strategy is focused on improving our long-term financial performance, enhancing our market positions, and expanding our existing and complementary product lines. We seek to obtain businesses for attractive post-synergy multiples, creating value for our stockholders from synergy realization, leveraging the acquired products across our customer base, creating new platforms for future growth, and assuming best practices from the businesses we acquire. While the expected benefits on earnings is estimated at the commencement of each transaction, once the execution of the plan and integration occur, we are generally unable to accurately estimate or track what the ultimate effects have been due to system integrations and movements of activities to multiple facilities. As historical business combinations and restructuring plans have not allowed us to accurately separate realized synergies compared to what was initially identified, we measureestimate the synergy realization based on the overall segment profitability post integration.
RPC Group Plc
In July 2019, the Company completed the acquisition of RPC for aggregate consideration of $6.1 billion. RPC is a leading plastic product design and engineering company for packaging and select non-packaging markets, with 189 sites in 34 countries. RPC develops and manufactures a diverse range of products for a wide variety of customers, including many household names, and enjoys strong market positions in many of the end markets it serves and the geographical areas in which it operates. It uses a wide range of polymer conversion techniques and is also one of the largest plastic recyclers in Europe. The international based facilities are operated within the Consumer Packaging International segment with the remaining U.S. based facilities operated within the Consumer Packaging North America segment. The Company expects to realize annual cost synergies of $150 million of which an estimated $85 million is expected to be realized inDuring fiscal 2020. See Note 4 to the Consolidated Financial Statements for further details on the acquisition of RPC.
Seal For Life
In July 2019,2021, the Company completed the sale of our Seal For Life ("SFL")its U.S. Flexible Packaging Converting business which was primarily operated in our Health, Hygiene & Specialtiesthe Engineered Materials segment for net proceeds of $325$140 million and is divesting a non-core Czech Republic Reaction Injection Molding business which is operated in the Consumer Packaging International segment for an estimated sales price of approximately $22 million. SFLA net pretax loss on the divestitures of $22 million was recorded $96 million in fiscal 2021 within Restructuring and transaction activities on the Consolidated Statements of Income. The U.S Flexible Packaging Converting business and the Czech Republic Reaction Injection Molding business recorded net sales during fiscal 2019.2020 of $203 million and $41 million, respectively.
Raw Material Trends. Our primary raw material is plastic resin. Polypropylene and polyethylene account for approximately 90% of our plastic resin pounds purchased. The three month simple average price per pound, as published by U.S. market indices, were as follows:
| | Polyethylene Butene Film | | | Polypropylene | |
| | 2020 | | | 2019 | | | 2018 | | | 2020 | | | 2019 | | | 2018 | |
1st quarter | | $ | .58 | | | $ | .64 | | | $ | .68 | | | $ | .58 | | | $ | .76 | | | $ | .71 | |
2nd quarter | | | .59 | | | | .61 | | | | .69 | | | | .53 | | | | .63 | | | | .75 | |
3rd quarter | | | .56 | | | | .63 | | | | .68 | | | | .48 | | | | .62 | | | | .76 | |
4th quarter | | | — | | | | .59 | | | | .66 | | | | — | | | | .62 | | | | .85 | |
Due to differences in the timing of passing through resin cost changes to our customers on escalator/de-escalator programs, segments are negatively impacted in the short term when plastic resin costs increase and are positively impacted when plastic resin costs decrease. This timing lag and competitor behaviors related to passing through raw material cost changes could affect our results as plastic resin costs fluctuate. In addition, we use other materials such as butyl rubber, adhesives, paper and packaging materials, linerboard, rayon, polyester fiber, and foil, in various manufacturing processes. These raw materials are available from multiple sources and we purchase from a variety of global suppliers. While temporary shortages of raw materials can occur, we expect to continue to successfully manage raw materials supplies without significant supply interruptions.
Outlook. The Company is affected by general economic and industrial growth, plastic resin availability and affordability, and general industrial production. COVID-19 pandemic has resulted in both advantaged and disadvantaged products within all segments. Our results are affected by both the duration certain products remain advantaged and timing of when disadvantage products normalize. 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, including those changes being impactedcustomers. In the near term, recent resin inflation will create a headwind for the Company, which we believe will be offset by the currentcontinued favorable product mix associated with pivoting our assets to produce products related to COVID-19 pandemic. Based on current market conditionsprotection. By providing advantaged products in targeted markets, we believe portions of our Consumer Packaging segments and our Engineered Materials segment will continue to see volume pressure in the near-term as they are more highly indexed to food service and industrials markets. We also believe our Health, Hygiene, & Specialties segment will continue to have strong volumes for the duration of fiscal 2020 as a result of strong demand for healthcare products. We continue to believe our underlying long-term demand fundamentalsfundamental in all divisions will remain intactstrong as we continue our focus on delivering protective solutions that enhance consumer safety and execute on the Company’s mission statement of “Always“Always Advancing to Protect What’s ImportantImportant.”. For fiscal 2020,2021, we project cash flow from operations and free cash flow of $1,450between $1,675 to $1,575 million and $830 million, respectively. The free cash flow assumes an estimated $620$700 million of capital spending, cash taxes of $170 million, cash interest costs of $430 million, and other cash uses of $50 million related to changes in working capital, acquisition integration expenses and costs to achieve synergies. For the definition of free cash flow and further information related to free cash flow as a non-GAAP financial measure, see “Liquidity and Capital Resources”.spending.
Results of Operations
Comparison of the Quarterly Period Ended June 27, 2020April 3, 2021 (the "Quarter"“Quarter”) and the Quarterly Period Ended June 29, 2019March 28, 2020 (the "Prior Quarter"“Prior Quarter”)
Acquisition sales and operating income disclosed within this section represents the results from acquisitions for the current period. 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 | | | Quarter | | | Prior Quarter | | | $ Change | | | % Change | |
Net sales | | $ | 2,910 | | | $ | 1,937 | | | $ | 973 | | | | 50 | % | | $ | 3,370 | | | $ | 2,975 | | | $ | 395 | | | | 13 | % |
Cost of goods sold | | | | 2,706 | | | | 2,391 | | | | 315 | | | | 13 | % |
Other operating expenses | | | | 331 | | | | 300 | | | | 31 | | | | 10 | % |
Operating income | | $ | 347 | | | $ | 215 | | | $ | 132 | | | | 61 | % | | $ | 333 | | | $ | 284 | | | $ | 49 | | | | 17 | % |
Operating income percentage of net sales | | | 12 | % | | | 11 | % | | | | | | | | | |
Net Sales: The net sales growth is primarily attributed to acquisition net sales of $1,092 million and a base volume increase of 2%. These increases were partially offset by lowerincreased selling prices of $99$192 million due to the pass through of lowerhigher resin costs, organic volume growth of 5%, and a $19$92 million unfavorablefavorable impact from foreign currency changes andchanges. These increases were partially offset by Prior Quarter divestiture sales of $34$53 million.The organic volume growth was primarily due to organic growth investments, modest recovery of certain markets that had previously been facing COVID-19 headwinds, and higher demand in our advantaged health and hygiene products as the result of COVID-19.
Cost of goods sold:The cost of goods sold increase is attributed to the organic volume growth, product mix, higher resin costs and a $74 million increase from foreign currency changes. These increases were partially offset by Prior Quarter divestiture cost of goods sold of $42 million and a $19 million inventory step-up.
Other operating incomeexpenses: The other operating expenses increase is primarily attributed to acquisition operating income of $111 million, a $34 million favorable impact from cost productivity and product mix, a $12 million increase due to the base volume growth, and a $6 million decrease in depreciation and amortization. These improvements were partially offset by a $10$21 million increase in business integration costs,expense and a $5$15 million unfavorableincrease in selling, general, and administrative expense.
Operating Income: The operating income increase is primarily attributed to a $35 million increase from the organic volume growth, a $19 million inventory step-up in the Prior Quarter related to the RPC acquisition, a $16 million favorable impact from price cost spread including synergies and product mix, and a $16 million favorable impact from foreign currency, changespartially offset by a $21 million increase in business integration expense, and Prior Quarter divestiture operating income of $9 million.a $15 million increase in selling, general, and administrative expense.
Consumer Packaging International | | | | | | | | | | | | | | | | | | |
| | Quarter | | | Prior Quarter | | | $ Change | | | % Change | | | Quarter | | | Prior Quarter | | | $ Change | | | % Change | |
Net sales | | $ | 1,020 | | | $ | 52 | | | $ | 968 | | | | — | | | $ | 1,060 | | | $ | 970 | | | $ | 90 | | | | 9 | % |
Operating income (loss) | | $ | 89 | | | $ | (1 | ) | | $ | 90 | | | | — | | |
Operating income percentage of net sales | | | 9 | % | | | (2 | )% | | | | | | | | | |
Cost of goods sold | | | | 842 | | | | 785 | | | | 57 | | | | 7 | % |
Other operating expenses | | | | 159 | | | | 132 | | | | 27 | | | | 20 | % |
Operating income | | | $ | 59 | | | $ | 53 | | | $ | 6 | | | | 11 | % |
Net Sales: The net sales and operating income growth in the Consumer Packaging International segment is primarily attributed to organic volume growth of 4%, and a $71 million favorable impact from foreign currency changes. The organic volume growth was primarily due to recovery in emerging markets.
Cost of goods sold: The cost of goods sold increase is attributed to the RPC acquisition.organic volume growth and a $57 million increase from foreign currency changes. These increases were partially offset by change in product mix and the Prior Quarter $19 million inventory step-up.
Other operating expenses: The other operating expenses increase is primarily attributed to a $24 million increase in business integration activities.
Operating Income: The operating income increase is primarily attributed to a $12 million favorable impact from foreign currency, an $11 million increase from the organic volume growth, and a $19 million inventory step-up in the Prior Quarter, partially offset by a $24 million increase in business integration activities, and an increase in depreciation and amortization.
Consumer Packaging North America | | | | | | | | | | | | | | | | | | |
| | Quarter | | | Prior Quarter | | | $ Change | | | % Change | | | Quarter | | | Prior Quarter | | | $ Change | | | % Change | |
Net sales | | $ | 718 | | | $ | 652 | | | $ | 66 | | | | 10 | % | | $ | 731 | | | $ | 633 | | | $ | 98 | | | | 15 | % |
Cost of goods sold | | | | 597 | | | | 508 | | | | 89 | | | | 18 | % |
Other operating expenses | | | | 57 | | | | 56 | | | | 1 | | | | 2 | % |
Operating income | | $ | 93 | | | $ | 73 | | | $ | 20 | | | | 27 | % | | $ | 77 | | | $ | 69 | | | $ | 8 | | | | 12 | % |
Operating income percentage of net sales | | | 13 | % | | | 11 | % | | | | | | | | | |
Net Sales: The net sales growth in the Consumer Packaging North America segment is primarily attributed to acquisition net sales of $117 million related to the U.S. portion of the acquired RPC business, partially offset by lowerincreased selling prices of $51$60 million due to the pass through of lowerhigher resin costs and organic volume growth of 5%. The organic volume growth was primarily due to continued strength in closures, bottles and containers.
Cost of goods sold: The cost of goods sold increase is attributed to the organic volume growth, product mix and higher resin costs.
Operating Income: The operating income increase is primarily attributed to acquisition operating income of $19 million.
Engineered Materials | | | | | | | | | |
| | Quarter | | | Prior Quarter | | | $ Change | | | % Change | |
Net sales | | $ | 564 | | | $ | 630 | | | $ | (66 | ) | | | (10 | )% |
Operating income | | $ | 81 | | | $ | 83 | | | $ | (2 | ) | | | (2 | )% |
Operating income percentage of net sales | | | 14 | % | | | 13 | % | | | | | | | | |
The net sales decrease in the Engineered Materials segment is primarily attributed to a 8% base volume decline reflecting the impact of COVID-19 and lower selling prices of $24$9 million due to the pass through of lower resin costs, partially offset by acquisition net sales of $7 million.
The operating income decrease is primarily attributed to a $6 million unfavorable impactincrease from the baseorganic volume decline, partially offset by cost productivitygrowth and a decrease in depreciation and amortization.amortization, partially offset by a negative impact from price cost spread.
Health, Hygiene & Specialties | | | | | | | | | | | | | | | | | | |
| | Quarter | | | Prior Quarter | | | $ Change | | | % Change | | | Quarter | | | Prior Quarter | | | $ Change | | | % Change | |
Net sales | | $ | 608 | | | $ | 603 | | | $ | 5 | | | | 1 | % | | $ | 781 | | | $ | 644 | | | $ | 137 | | | | 21 | % |
Cost of goods sold | | | | 609 | | | | 519 | | | | 90 | | | | 17 | % |
Other operating expenses | | | | 58 | | | | 59 | | | | (1 | ) | | | (2 | )% |
Operating income | | $ | 84 | | | $ | 60 | | | $ | 24 | | | | 40 | % | | $ | 114 | | | $ | 66 | | | $ | 48 | | | | 73 | % |
Operating income percentage of net sales | | | 14 | % | | | 10 | % | | | | | | | | | |
Net Sales: The net sales growth in the Health, Hygiene & Specialties segment is primarily attributed to baseorganic volume growth of 14%8%, partially offset by lowerand increased selling prices of $24$83 million due to the pass through of lowerhigher resin costs. The organic volume growth was primarily due to organic growth investments and higher demand in our advantage health and hygiene products as the result of COVID-19.
Cost of goods sold: The cost of goods sold increase is attributed to the organic volume growth, product mix and higher resin costs.
Operating Income: The operating income increase is primarily attributed to a $12 million impact from the organic volume growth and a $31 million favorable impact from price cost spread and product mix.
Engineered Materials | | | | | | | | | |
| | Quarter | | | Prior Quarter | | | $ Change | | | % Change | |
Net sales | | $ | 798 | | | $ | 728 | | | $ | 70 | | | | 10 | % |
Cost of goods sold | | | 658 | | | | 579 | | | | 79 | | | | 14 | % |
Other operating expenses | | | 57 | | | | 53 | | | | 4 | | | | 8 | % |
Operating income | | $ | 83 | | | $ | 96 | | | $ | (13 | ) | | | (14 | )% |
Net Sales: The net sales growth in the Engineered Materials segment is primarily attributed to increased selling prices of $69 million due to the pass through of higher resin costs, organic volume growth of 3%, and a $19$15 million unfavorablefavorable impact from foreign currency changes, andpartially offset by Prior Quarter divestiture sales of $34 million related to the divested SFL business.$43 million.
Cost of goods sold:The operating income cost of goods sold increase is primarily attributed to a $28 million favorable impact from cost productivity andthe organic volume growth, product mix, higher resin costs, and an $18a $13 million favorable impactincrease from the base volume increase.foreign currency changes. These increases were partially offset by a $9 million increase in business integration costs, a $5 million unfavorable impact from foreign currency changes, and Prior Quarter divestiture cost of goods sold of $35 million.
Operating Income: The operating income of $9 million related to the divested SFL business.
Other (income) expense, net | | | | | | | | | |
| | Quarter | | | Prior Quarter | | | $ Change | | | % Change | |
Other (income) expense, net | | $ | (7 | ) | | $ | 136 | | | $ | (143 | ) | | | (105 | )% |
The other (income) expense improvementdecrease is primarily attributed to non-recurring, unfavorable a $10 million negative impact from price cost spread and Prior Quarter divestiture operating income.
Other expense, net | | | | | | | | | |
| | Quarter | | | Prior Quarter | | | $ Change | | | % Change | |
Other expense, net | | $ | 6 | | | $ | — | | | $ | 6 | | | | N/A | |
The other expense is primarily attributed to debt extinguishment costs partially offset by foreign currency changes related to the foreign exchange forward contracts entered into as a partremeasurement of the RPC acquisition in the Prior Quarter.non-operating intercompany balances.
Interest expense, net | | | | | | | | | | | | | | | | | | |
| | Quarter | | | Prior Quarter | | | $ Change | | | % Change | | | Quarter | | | Prior Quarter | | | $ Change | | | % Change | |
Interest expense, net | | $ | 110 | | | $ | 71 | | | $ | 39 | | | | 55 | % | | $ | 84 | | | $ | 111 | | | $ | (27 | ) | | | (24 | )% |
The interest expense increasedecrease is primarily attributed to the incremental debt facilities entered into as partresult of the RPC acquisition.repayments on long-term borrowings in fiscal 2020 and recent refinancing activities (see Note 7).
Income tax expense (benefit) | | | | | | | | | |
| | Quarter | | | Prior Quarter | | | $ Change | | | % Change | |
Income tax expense (benefit) | | $ | 53 | | | $ | (5 | ) | | $ | 58 | | | | — | |
The income tax expense increase is primarily attributed to higher pre-tax book income and the Prior Quarter included a loss on foreign exchange forward contracts resulting in a $30 million income tax benefit.
Changes in Comprehensive Income
The $201$303 million improvement in comprehensive income from the Prior Quarter was primarily attributed to a $178$55 million improvement in net income, and a $22$163 million favorable change in the fair value of derivative instruments, net of tax.tax, and an $84 million favorable change in currency translation. 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 20202021 versus fiscal 20192020 is primarily attributed to the change in the forward interest and foreign exchange curves between measurement dates.
Comparison of the ThreeTwo Quarterly Periods Ended June 27, 2020April 3, 2021 (the "YTD"“YTD”) and the ThreeTwo Quarterly Periods Ended June 29, 2019March 28, 2020 (the "Prior YTD"“Prior YTD”)
Acquisition sales and operating income disclosed within this section represents theThe Company’s U.S. based results from acquisitions for the current period.YTD and Prior YTD are based on a twenty-seven and twenty-six week period, respectively. 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 | | | YTD | | | Prior YTD | | | $ Change | | | % Change | |
Net sales | | $ | 8,701 | | | $ | 5,859 | | | $ | 2,842 | | | | 49 | % | | $ | 6,506 | | | $ | 5,791 | | | $ | 715 | | | | 12 | % |
Cost of goods sold | | | | 5,224 | | | | 4,687 | | | | 537 | | | | 11 | % |
Other operating expenses | | | | 645 | | | | 621 | | | | 24 | | | | 4 | % |
Operating income | | $ | 830 | | | $ | 576 | | | $ | 254 | | | | 44 | % | | $ | 637 | | | $ | 483 | | | $ | 154 | | | | 32 | % |
Operating income percentage of net sales | | | 10 | % | | | 10 | % | | | | | | | | | |
Net Sales: The net sales growth is primarily attributed to acquisition net salesorganic volume growth of $3,346 million and a base volume increase of 1%6%, partially offset by lowerincreased selling prices of $429$181 million due to the pass through of lowerhigher resin costs, Prior YTD divestiture sales of $86a $142 million and a $32 million unfavorablefavorable impact from foreign currency changes.changes, and a $131 million increase from extra shipping days in the YTD. These increases were partially offset by Prior Quarter divestiture sales of $68 million. The organic volume growth was primarily due to organic growth investments, modest recovery of certain markets that had previously been facing COVID-19 headwinds, and higher demand in our advantaged health and hygiene products as the result of COVID-19.
Cost of goods sold: The cost of goods sold increase is attributed to the organic volume growth, product mix, higher resin costs, a $114 million increase from foreign currency changes, and a $101 million increase from extra shipping day in the YTD. These increases were partially offset by Prior YTD divestiture cost of goods sold of $55 million and a $19 million inventory step-up.
Other operating expenses: The other operating expenses increase is primarily attributed to an $11 million increase in selling, general, and administrative expenses and an increase from extra shipping days in the YTD.
Operating Income: The operating income increase is primarily attributed to acquisition operating income of $245an $81 million increase from the organic volume growth, a $22 million decrease in depreciation and amortization, a $16$33 million favorable impact from price cost spread including synergies and product mix, a $23 million favorable impact from foreign currency, a $22 million benefit from extra shipping days in the base volume increase,YTD, and a $7$19 million decreaseinventory step-up in business integration costs. These improvements werethe Prior YTD related to the RPC acquisition, partially offset by a $9an $11 million increase in selling, general, and administrative expenses, and Prior YTD divestiture operating income of $25 million.income.
Consumer Packaging International | | | | | | | | | | | | | | | | | | |
| | YTD | | | Prior YTD | | | $ Change | | | % Change | | | YTD | | | Prior YTD | | | $ Change | | | % Change | |
Net sales | | $ | 3,125 | | | $ | 153 | | | $ | 2,972 | | | | — | | | $ | 2,048 | | | $ | 1,900 | | | $ | 148 | | | | 8 | % |
Cost of goods sold | | | | 1,634 | | | | 1,535 | | | | 99 | | | | 6 | % |
Other operating expenses | | | | 279 | | | | 269 | | | | 10 | | | | 4 | % |
Operating income | | $ | 195 | | | $ | (2 | ) | | $ | 197 | | | | — | | | $ | 135 | | | $ | 96 | | | $ | 39 | | | | 41 | % |
Operating income percentage of net sales | | | 6 | % | | | (1 | )% | | | | | | | | | |
Net Sales: The net sales and operating income growth in the Consumer Packaging International segment is primarily attributed to organic volume growth of 4% and a $115 million favorable impact from foreign currency changes, partially offset by lower selling prices of $48 million. The organic volume growth was primarily due to recovery in emerging markets.
Cost of goods sold: The cost of goods sold increase is attributed to the RPC acquisition.organic volume growth and a $93 million increase from foreign currency changes. These increases were partially offset by change in product mix and a $19 million inventory step-up in the Prior YTD.
Consumer Packaging North America | | | | | | | | | |
| | YTD | | | Prior YTD | | | $ Change | | | % Change | |
Net sales | | $ | 2,104 | | | $ | 1,892 | | | $ | 212 | | | | 11 | % |
Operating income | | $ | 226 | | | $ | 168 | | | $ | 58 | | | | 35 | % |
Operating income percentage of net sales | | | 11 | % | | | 9 | % | | | | | | | | |
Other operating expenses: The other operating expenses increase is primarily attributed to an increase in business integration expense.
Operating Income: The operating income increase is primarily attributed to an $18 million increase from the organic volume growth, an $18 million favorable impact from foreign currency, and a $19 million inventory step-up in the Prior YTD related to the RPC acquisition, partially offset by an $18 million increase in business integration activities.
Consumer Packaging North America | | | | | | | | | |
| | YTD | | | Prior YTD | | | $ Change | | | % Change | |
Net sales | | $ | 1,417 | | | $ | 1,244 | | | $ | 173 | | | | 14 | % |
Cost of goods sold | | | 1,155 | | | | 1,017 | | | | 138 | | | | 14 | % |
Other operating expenses | | | 126 | | | | 114 | | | | 12 | | | | 11 | % |
Operating income | | $ | 136 | | | $ | 113 | | | $ | 23 | | | | 20 | % |
Net Sales: The net sales growth in the Consumer Packaging North America segment is primarily attributed to acquisition net salesorganic volume growth of $356 million related to the U.S. portion of the acquired RPC business and a 1% base volume improvement, partially offset by lower6%, increased selling prices of $161$56 million, and a $40 million increase from extra shipping days in the YTD. The organic volume growth was primarily due to the pass through of lower resin costs.continued strength in closures, bottles and containers.
Cost of goods sold: The cost of goods sold increase is attributed to the organic volume growth, product mix, higher resin costs, and a $30 million increase from extra shipping day in the YTD.
Other operating expenses: The other operating expenses increase is primarily attributed an increase in selling, general, and administrative expense.
Operating Income: The operating income increase is primarily attributed to acquisition operating income of $47a $22 million increase from the organic volume growth and an $8a $7 million favorable impactbenefit from cost productivityextra shipping days in the YTD, partially offset by increased selling, general, and product mix.administrative expense.
Engineered Materials | | | | | | | | | | |
Health, Hygiene & Specialties | | | | | | | | | | |
| | YTD | | | Prior YTD | | | $ Change | | | % Change | | | YTD | | | Prior YTD | | | $ Change | | | % Change | |
Net sales | | $ | 1,747 | | | $ | 1,910 | | | $ | (163 | ) | | | (9 | )% | | $ | 1,521 | | | $ | 1,254 | | | $ | 267 | | | | 21 | % |
Cost of goods sold | | | | 1,182 | | | | 1,013 | | | | 169 | | | | 17 | % |
Other operating expenses | | | | 129 | | | | 128 | | | | 1 | | | | 1 | % |
Operating income | | $ | 239 | | | $ | 250 | | | $ | (11 | ) | | | (4 | )% | | $ | 210 | | | $ | 113 | | | $ | 97 | | | | 86 | % |
Operating income percentage of net sales | | | 14 | % | | | 13 | % | | | | | | | | | |
Net Sales: The net sales decrease in the Engineered Materials segment is primarily attributed to lower selling prices of $123 million due to the pass through of lower resin costs and a 3% base volume decline as a result of COVID-19, partially offset by acquisition net sales of $18 million.
The operating income decrease is primarily attributed to a $12 million unfavorable impact from price cost spread and an $8 million unfavorable impact from the base volume decline, partially offset by an $8 million decrease in depreciation and amortization.
Health, Hygiene & Specialties | | | | | | | | | |
| | YTD | | | Prior YTD | | | $ Change | | | % Change | |
Net sales | | $ | 1,725 | | | $ | 1,904 | | | $ | (179 | ) | | | (9 | )% |
Operating income | | $ | 170 | | | $ | 160 | | | $ | 10 | | | | 6 | % |
Operating income percentage of net sales | | | 10 | % | | | 8 | % | | | | | | | | |
The net sales decreasegrowth in the Health, Hygiene & Specialties segment is primarily attributed to lowerorganic volume growth of 12%, increased selling prices of $145$90 million due to the pass through of lowerhigher resin costs, and Priora $42 million increase from extra shipping days in the YTD, sales of $86 million related to the divested SFL business, partially offset by a 5% basePrior YTD divestiture sales of $14 million. The organic volume increase.growth was primarily due to organic growth investments and higher demand in our advantage health and hygiene products as the result of COVID-19.
Cost of goods sold: The cost of goods sold increase is attributed to the organic volume growth, product mix, higher resin costs, and a $31 million increase from extra shipping day in the YTD. These increases were partially offset by Prior YTD divestiture cost of goods sold.
Operating Income: The operating income increase is primarily attributed to a $23$36 million increase from the organic volume growth, a $47 million favorable impact from the base volume increase, a $9 million favorable impact fromprice cost productivityspread including synergies and product mix, and a $10benefit from extra shipping days in the YTD.
Engineered Materials | | | | | | | | | |
| | YTD | | | Prior YTD | | | $ Change | | | % Change | |
Net sales | | $ | 1,520 | | | $ | 1,393 | | | $ | 127 | | | | 9 | % |
Cost of goods sold | | | 1,253 | | | | 1,122 | | | | 131 | | | | 12 | % |
Other operating expenses | | | 111 | | | | 110 | | | | 1 | | | | 1 | % |
Operating income | | $ | 156 | | | $ | 161 | | | $ | (5 | ) | | | (3 | )% |
Net Sales: The net sales growth in the Engineered Materials segment is primarily attributed to increased selling prices of $83 million decreasedue to the pass through of higher resin costs, a $44 million increase from extra shipping days in depreciationthe YTD, organic volume growth of 2%, and amortization.a $22 million favorable impact from foreign currency changes, partially offset by Prior YTD divestiture sales of $54 million.
Cost of goods sold: The cost of goods sold increase is attributed to the organic volume growth, product mix, higher resin costs, an $18 million increase from foreign currency changes, and a $35 million increase from extra shipping day in the YTD. These increases were partially offset by Prior YTD divestiture cost of goods sold of $45 million.
Operating Income: The operating income of $25decrease is primarily attributed to a $15 million related tounfavorable impact from price cost spread and Prior YTD divestiture operating income. These decreases were partially offset by an improvement from the divested SFL business.
Other expense, net | | | | | | | | | |
| | YTD | | | Prior YTD | | | $ Change | | | % Change | |
Other expense, net | | $ | 6 | | | $ | 159 | | | $ | (153 | ) | | | (105 | )% |
Other expenseorganic volume growth, and a benefit from extra shipping days in the YTD includes $26 million of debt extinguishment costs,.
Other expense, net | | | | | | | | | |
| | YTD | | | Prior YTD | | | $ Change | | | % Change | |
Other expense, net | | $ | 31 | | | $ | 13 | | | $ | 18 | | | | 138 | % |
The other expense increase is primarily a result of the prepayment of the entire outstanding amount of our existing euro denominated term loan, partially offset by favorableattributed to foreign currency changes associated withrelated to the remeasurement of non-operating intercompany balances. The Prior YTD primarily contains non-recurring, unfavorable foreign currency changes related to the foreign exchange forward contracts entered into as a part of the RPC acquisition.
Interest expense, net | | | | | | | | | | | | | | | | | | |
| | YTD | | | Prior YTD | | | $ Change | | | % Change | | | YTD | | | Prior YTD | | | $ Change | | | % Change | |
Interest expense, net | | $ | 339 | | | $ | 201 | | | $ | 138 | | | | 69 | % | | $ | 181 | | | $ | 229 | | | $ | (48 | ) | | | (21 | )% |
The interest expense increasedecrease is primarily attributed to the incremental debt facilities entered into as partresult of the RPC acquisition.
Income tax expense | | | | | | | | | |
| | YTD | | | Prior YTD | | | $ Change | | | % Change | |
Income tax expense | | $ | 121 | | | $ | 41 | | | $ | 80 | | | | 195 | % |
The income tax expense increase is primarily attributed to higher pre-tax book incomerepayments on long-term borrowings in fiscal 2020 and the Prior YTD included a loss on foreign exchange forward contracts resulting in a $30 million income tax benefit.recent refinancing activities.
Changes in Comprehensive Income
The $80$476 million improvement in comprehensive income from the Prior YTD was primarily attributed to a $189$138 million improvement in net income, partially offset by a $66$170 million unfavorablefavorable change in currency translation, and a $42$167 million unfavorablefavorable change in the fair value of derivative instruments, net of tax. 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. The change in currency translation in the YTD was primarily attributed to locations utilizing the euro, British pound sterling, Brazilian real, Canadian dollar, Chinese renminbi and Mexican peso as the 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 20202021 versus fiscal 20192020 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 $850 million asset-based revolving line of credit that matures in May 2024. The Company was in compliance with all covenants at the end of the QuarterQuarter. (see Note 7).
Cash Flows
Net cash from operating activities increased $408$105 million from the Prior YTD primarily attributed to improved net income prior to non-cash activities.
Net cash used in investing activities decreased $117increased $194 million from the Prior YTD primarily attributed to increased capital expenditures and proceeds from the settlement of cross-currency derivatives in the Prior YTD, partially offset by increased capital expenditures as a resultproceeds from the divestiture of business in the RPC acquisition.YTD.
Net cash used in financing activities increased $237$48 million from the Prior YTD primarily attributed to higher net debt repayments, partially offset by lower share repurchase activity.higher proceeds from issuance of common stock.
Share Repurchases
No shares were repurchased during the quarter. Authorized share repurchases of $393 million remain available to the Company.
Free Cash Flow
We define "Free cash flow" as cash flow from operating activities less net additions to property, plant and equipment.
Based on our definition, our consolidated Free cash flow is summarized as follows:
| | Three Quarterly Periods Ended | |
| | June 27, 2020 | |
Cash flow from operating activities | | $ | 979 | |
Additions to property, plant and equipment, net | | | (419 | ) |
Free cash flow | | $ | 560 | |
Free cash flow, as presented in this document, is a supplemental financial measure that is not required by, or presented in accordance with, generally accepted accounting principles in the U.S. ("GAAP"). Free cash flow is not a GAAP financial measure and should not be considered as an alternative to cash flow from operating activities or any other measure determined in accordance with GAAP. We use Free cash flow as a measure of liquidity because it assists us in assessing our company’s ability to fund its growth through its generation of cash, and believe it is useful to investors for such purpose. In addition, Free cash flow and similar measures are widely used by investors, securities analysts and other interested parties in our industry to measure a company's liquidity. Free cash flow may be calculated differently by other companies, including other companies in our industry, limiting its usefulness as a comparative measure.
Liquidity Outlook
At June 27, 2020,April 3, 2021, our cash balance was $906$843 million, of which approximately 60%80% was 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 liquidity needs over the next twelve months. We do not expect our free cash flow to be sufficient to cover all long-term debt obligations and intend to refinance these obligations prior to maturity. However, we cannot predict our future results of operations and our ability to meet our obligations involves numerous risks and uncertainties, including, but not limited to, those described in the “Risk Factors” section of our most recent Form 10-K filed with the Securities and Exchange Commission and in this Form 10-Q, if any.
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 the issuer.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 the 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 | | | Two Quarterly Periods Ended | |
| | June 27, 2020 | | | April 3, 2021 | |
Net sales | | $ | 4,361 | | | $ | 3,278 | |
Gross profit | | | 932 | | | | 641 | |
Earnings from continuing operations | | | 189 | | | | 167 | |
Net income | | $ | 189 | | | $ | 167 | |
Includes $20$12 million of income associated with intercompany activity with non-guarantor subsidiaries.
| | June 27, 2020 | | | September 28, 2019 | | | April 3, 2021 | | | September 26, 2020 | |
Assets | | | | | | | | | | | | |
Current assets | | $ | 1,674 | | | $ | 1,237 | | | $ | 1,712 | | | $ | 1,417 | |
Noncurrent assets | | | 6,339 | | | | 5,088 | | | | 5,926 | | | | 6,153 | |
| | | | | | | | | | | | | | | | |
Liabilities | | | | | | | | | | | | | | | | |
Current liabilities | | $ | 915 | | | $ | 862 | | | $ | 1,048 | | | $ | 841 | |
Noncurrent liabilities | | | 12,391 | | | | 11,915 | | | | 11,619 | | | | 11,936 | |
Includes $475$715 million and $572 million of intercompany payables due to non-guarantor subsidiaries as of June 27,April 3, 2021 and September 26, 2020, and $45 million of intercompany receivables due from non-guarantor subsidiaries as of September 28, 2019.respectively.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
We are exposed to market risk from changes in interest rates primarily through our senior secured credit facilities. Our senior secured credit facilities are comprised of (i) $6.2$3.8 billion term loans and (ii) a $850 million 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 LIBOR. The applicable margin for LIBOR rate borrowings under the revolving credit facility ranges from 1.25% to 1.50%, and the margin for term loans is 2.00%1.75% per annum. As of period end, the LIBOR rate of approximately 0.18%0.12% was applicable to the term loans. A 0.25% change in LIBOR would increase our annual interest expense by $8$2 million on variable rate term loans.
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. At period end, the Company effectively had (i) a $450 million interest rate swap transaction that swaps a one-month variable LIBOR contract for a fixed annual rate of 1.398%, with an expiration in June 2026, (ii) a $1 billion interest rate swap transaction that swaps a one-month variable LIBOR contract for a fixed annual rate of 1.835% with an expiration in June 2026, (iii) a $400 million interest rate swap transaction that swaps a one-month variable LIBOR contract for a fixed annual rate of 1.916% with an expiration in June 2026, (iv) a $884 million interest rate swap transaction that swaps a one-month variable LIBOR contract for a fixed annual rate of 1.857%, with an expiration in June 2024, and (v) a $473 million interest rate swap transaction that swaps a one-month variable LIBOR contract for a fixed annual rate of 2.050%, with an expiration in June 2024.
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 $20an $18 million unfavorable impact on our Net income for the threetwo quarterly periods ended June 27, 2020.April 3, 2021.
The Company is party to certain cross-currency swaps to hedge a portion of our foreign currency risk. The swap agreements mature May 2022 (€250 million), June 2024 (€1,625 million) and July 2027 (£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 27, 2020,April 3, 2021, we had outstanding long-term debt of €785 million that was designated as a hedge of our net investment in certain euro-denominated foreign subsidiaries.
Item 4. Controls and Procedures
(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 "disclosurecompany’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'sCompany’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 controls.
The impact of travel and safety restriction related to the COVID-19 pandemic has negatively impacted various integration activities including the ongoing process of implementing standardized internal control procedures over financial reporting within the recently acquired RPC business. We will continue to evaluate the potential impacts and closely monitor developments as they arise and will continue to respond accordingly.reporting.
There were no other changes in our internal control over financial reporting that occurred during the quarter ended that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Part II. Other Information
Item 1. Legal Proceedings
There have been no material changes in legal proceedings from the items disclosed in our 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 filed with the Securities and Exchange Commission, and our Quarterly Report on Form 10-Q for the quarter ended March 28, 2020, including those under the heading "Risk Factors" and other information contained in this Quarterly Report.“Risk Factors”. Realization of any of these risks could have a material adverse effect on our business, financial condition, cash flows and results of operations.
The ongoing COVID-19 pandemic could continue to have an adverse impact on our business, financial condition, liquidity, and resultsAdditionally, we caution readers that the list of operations, which may be material.
The ongoing COVID-19 pandemic has impacted demand for some of our products and we may not be successful risk factors discussed in allocating resources to address rapidly shifting demand among our product lines. Additionally, the impact of travel and safety restrictions related to the COVID-19 pandemic has had and is expected to continue to have an adverse effect on certain integration activities, including the ongoing process of implementing standardized internal control procedures within the recently acquired RPC business. The extent to which the ongoing COVID-19 pandemic adversely impacts our business, financial condition, liquidity and results of operations will depend on future developments that are highly uncertain and cannot be predicted, including, but not limited to, the duration of the pandemic, the severity of the COVID-19 virus, potential actions taken by various governmental authorities in response to the pandemic, and the timing of recovery of the global economy. As a result, we cannot at this time predict the overall impact of the COVID-19 pandemic, but it could have a material adverse impact on our business, financial condition, liquidity, and results of operations. To the extent the COVID-19 pandemic adversely affects our business, financial condition, liquidity, or results of operations, it may also have the effect of heightening many of the other risks described in the “Risk Factors” section of our most recent Form 10-K.
Forward-looking Statements and Other Factors Affecting Future Results.
All forward-looking information and subsequent written and oral forward-looking statements attributable to us, or to persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements. Some of the factors that we believe could affect our results include:
| ● | risks associated with our substantial indebtedness and debt service; |
| ● | 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; |
| ● | risks related to acquisitions or divestitures and integration of acquired businesses and their operations, and realization of anticipated cost savings and synergies; |
| ● | risk related to international business, including as a result of the RPC transaction, including foreign currency exchange rate risk and the risks of compliance with applicable export controls, sanctions, anti-corruption laws and regulations; |
| ● | uncertainty regarding the United Kingdom’s withdrawal from the European Union and the outcome of future arrangements between the United Kingdom and the European Union; |
| ● | reliance on unpatented proprietary know-how and trade secrets; |
| ● | the phase-out of the London Interbank Offered Rate (LIBOR), or the replacement of LIBOR with a different reference rate or modification of the method used to calculate LIBOR, which may adversely affect interest rates; |
| ● | increases in the cost of compliance with laws and regulations, including environmental, safety, anti-plastic legislation, production and product laws and regulations; |
| ● | employee shutdowns or strikes or the failure to renew effective bargaining agreements; |
| ● | risks related to disruptions in the overall economy and the financial markets that may adversely impact our business, including as a result of the COVID-19 pandemic; |
| ● | risk of catastrophic loss of one of our key manufacturing facilities, natural disasters, and other unplanned business interruptions; |
| ● | risks related to the failure of, inadequacy of, or cybersecurity attacks on our information technology systems and infrastructure; |
| ● | risks related to market acceptance of our developing technologies and products; |
| ● | general business and economic conditions, particularly an economic downturn; |
| ● | risks that our restructuring programs may entail greater implementation costs or result in lower cost savings than anticipated; |
| ● | ability of our insurance to fully cover potential exposures; |
| ● | risks related to future write-offs of our substantial goodwill; |
| ● | risks of competition, including foreign competition, in our existing and future markets; |
| ● | new legislation or new regulations and the Company's corresponding interpretations of either may affect our business and consolidated financial condition and results of operations; and |
| ● | the other factors discussed in our most recent Form 10-K and in this Form 10-Q in the section titled "Risk Factors." |
We caution readers that the foregoing list of important factors 10-K 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 Form 10-Qreport may not in fact occur. Accordingly, investorsreaders should not place undue reliance on those statements. 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.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Repurchases of Equity Securities
During the quarter, the Company did not repurchase any shares. As of June 27, 2020,April 3, 2021, $393 million of authorized shares remained available to purchase under the program.
Exhibit No. | | Description of Exhibit |
3.1 | | |
3.2 | | |
4.1 | | |
4.2 | | Registration Rights Agreement, by and between Berry Global, Inc., Berry Global Group, Inc., each subsidiary of Berry Global, Inc. identified therein, and Citigroup Global Markets Inc. and J.P. Morgan Securities LLC, on behalf of themselves and as representatives of the initial purchasers, relating to the 0.95% First Priority Senior Secured Notes due 2024 (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on January 15, 2021). |
4.3 | | |
4.4 | | Registration Rights Agreement, dated March 4, 2021, by and between Berry Global, Inc., Berry Global Group, Inc., each subsidiary of Berry Global, Inc. identified therein, and Citigroup Global Markets Inc. Goldman Sachs & Co. LLC and Wells Fargo Securities, LLC, on behalf of themselves and as representatives of the initial purchasers, relating to the 1.57% First Priority Senior Secured Notes due 2026 (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on March 5, 2021). |
10.1 | | |
| | Subsidiary Guarantors |
| | Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer. |
| | Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer. |
| | Section 1350 Certification of the Chief Executive Officer. |
| | 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). |
*
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. | |
| | | |
July 31, 2020May 4, 2021 | By: | /s/ Mark W. Miles | |
| | Mark W. Miles | |
| | Chief Financial Officer | |