INVESTOR PRESENTATION

Transcription

1 Always Advancing To Protect What s Important INVESTOR PRESENTATION August 2017 NYSE: BERY

2 Safe Harbor Statements Forward-Looking Statements Statements in this presentation that are not historical, including statements relating to the expected future performance of the Company, are considered forward looking and are presented pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of You can identify forward-looking statements because they contain words such as believes, expects, may, will, should, would, could, seeks, approximately, intends, plans, estimates, anticipates outlook, or looking forward, or similar expressions that relate to our strategy, plans or intentions. All statements we make relating to our estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates and financial results or to our expectations regarding future industry trends are forward-looking statements. In addition, we, through our senior management team, from time to time make forward-looking public statements concerning our expected future operations and performance and other developments. These forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those that we expected. Important factors that could cause actual results to differ materially from our expectations, which we refer to as cautionary statements, are disclosed under Risk Factors and elsewhere in our Annual Report on Form 10-K and subsequent filings with the Securities and Exchange Commission, including, without limitation, in conjunction with the forward-looking statements included in this release. All forward-looking information and subsequent written and oral forward-looking statements attributable to us, or to persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements. Some of the factors that we believe could affect our results include: (1) risks associated with our substantial indebtedness and debt service; (2) changes in prices and availability of resin and other raw materials and our ability to pass on changes in raw material prices on a timely basis; (3) the impact of potential changes in interest rates: (4) performance of our business and future operating results; (5) risks related to our acquisition strategy and integration of acquired businesses; (6) reliance on unpatented know-how and trade secrets; (7) increases in the cost of compliance with laws and regulations, including environmental, safety, and production and product laws and regulations; (8) risks related to disruptions in the overall economy and the financial markets may adversely impact our business; (9) catastrophic loss of one of our key manufacturing facilities, natural disasters, and other unplanned business interruptions; (10) risks of competition, including foreign competition, in our existing and future markets;(11) general business and economic conditions, particularly an economic downturn; (12) potential failure to realize the intended benefits of acquisitions, including the inability to realize the anticipated cost synergies in the anticipated amounts or within the contemplated timeframes or cost expectations; (13) increased exposure to international risks, including foreign currency exchange rate risk and the risks of compliance with applicable export controls, sanctions, anticorruption laws and regulations and (14) the other factors discussed in the under the heading Risk Factors in our Annual Report on Form 10-K and subsequent filings with the Securities and Exchange Commission. We caution you that the foregoing list of important factors may not contain all of the material factors that are important to you. Accordingly, readers should not place undue reliance on those statements. All forward-looking statements are based upon information available to us on the date of this release. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. This presentation should be read together with Management s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and the related notes thereto included in our public filings. Non-GAAP Financial Measures This presentation includes certain non GAAP financial measures such as operating EBITDA, adjusted EBITDA, adjusted net income, and adjusted free cash flow to supplement, not substitute for, comparable measures. Investors are urged to consider carefully the comparable GAAP measures and the reconciliations to those measures provided in our earnings release, presentations, and SEC filings. Adjusted EBITDA is a non-gaap financial measure used by management to measure performance of the Company s operations, and also among the criteria upon which performancebased compensation may be based. Adjusted EBITDA also is used by our lenders for debt covenant compliance purposes. For further information about our non-gaap measures, please see our earnings release, SEC filings and supplemental data at the end of this presentation. Website Information We often post important information for investors on our website, in the Investor Relations section. We use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor the Investor Relations section of our website, in addition to following our press releases, SEC filings, public conference calls, presentations, and webcasts. The information contained on, or that may be accessed through our website, is not incorporated by reference into, and is not a part of this document. 2

3 Always Advancing To Protect What s Important Partnership Excellence Growth Safety 3

4 Who We Are.. Leader Consistent Scale #1 or 2 market position in ~75% of our net sales Low cost manufacturer Health and hygiene representing >40% of our annual revenues Dependable earnings and strong free cash flows Stable consumercentric end markets 20+% CAGR on net sales and EBITDA 131 facilities worldwide Over 4.5 billion lbs of resin purchased annually 19,000+ customers 4

5 Diverse Company Model Products End Markets Customers Over 40 differentiated product categories 90,000+ SKU s One stop shop Consumer-oriented Serving nearly all consumer markets Stable; products used everyday Large & small multinationals Top customer ~5% of net sales Top 10 customers <19% of net sales 5

6 Segment Overview Engineered Materials Health, Hygiene & Specialties Consumer Packaging 36% of Net Sales (1) 32% of Net Sales 32% of Net Sales Net Sales (1) $2.7B EBITDA (1) $476M Consumer and industrial flexible packaging Industrial & specialty tapes Can liners Net Sales $2.4B EBITDA $457M Medical garments Diapers Adult incont. Feminine care Disinfectant wipes Dryer sheets Filtration Net Sales $2.4B EBITDA $469M Closures Bottles Tubes Prescription vials Containers Drink cups 6 (1) Pro forma net sales and EBITDA includes AEP Industries, Inc. acquisition and expected $80 million of annual cost synergies -Net sales and EBITDA are for the fiscal year 2016 period -Berry produces components of the products in the HH&S segment -Adjusted for product realignment at the beginning of FY 2017

7 AEP Acquisition A Flexible Packaging Leader AEP Overview A leader in flexible plastic packaging products Strong North American footprint Long-standing, diverse base of 3,000+ customers Fiscal year ended October 2016: net sales of $1.1 billion and adjusted EBITDA of $113 million on ~1 billion pounds of resin purchases Closed on January 20, 2017 Tubing Custom Films Shrink Bundle Film Food Contact Key Products Hand Wrap Stretch Wrap Canliners Stretch Wrap Acquisition Rationale Highly complementary products, geographic footprint, and customers to Berry s legacy EM segment Increases Berry s scale with low execution risk Original annual cost synergies expected to meet or exceed $50 million, now increased to $80 million Deleveraging and accelerates pathway to leverage goal Value creating for Berry shareholders after expected cost synergies Adds approximately ~$100 million (1) of annual pro forma FCF Food Bags Seal Wrap Premium Canliners PROformance Films Food Contact Printed & Converted Film Food / Beverage = Overlap with Berry Pre-Cooked Meals 7 (1) Reflected to include AEP data as of the fiscal year ended Oct. 2016

8 Acquisition of AEP Adds Scale to Berry s Engineered Materials (EM) Segment EM + = Pro Forma EM (1) Pro Forma (1) Fiscal year ended September 2016 October 2016 Net Sales $ 1,628 $ 1,096 $ 2,724 $ 7,578 Adjusted EBITDA $ 283 $ 113 $ 476 $ 1,395 % of Net Sales 17.4% 10.3% 17.5% 18.4% Adjusted EBITDA - Capex $ 241 $ 97 $ 418 $ 1,081 % of Net Sales 14.8% 8.9% 15.3% 14.3% Employees 3,600 2,600 6,200 23,600 Manufacturing Facilities Note: $ in millions (1) Including $80 million of expected cost synergies

9 Key Strategic Fundamentals Focus on Growth Markets Consolidation Operational Excellence Strong Balance Sheet Diversify toward faster growing end markets and regions Fastest growing substrate Customer-linked innovation Disciplined approach Leverage scale and synergy capabilities Fragmented markets Continuous improvement/ Business excellence Sharing of best practices Investing in state-of-the-art technologies Operate with leverage below 4x Dependable & reliable cash flows 9

10 FY2017 Highlights Three Quarters Ended $230M Net Income 45% Increase vs PY $323M Adj. FCF 13% Increase vs PY $533M Operating Income $977M Operating EBITDA 24% 7% Increase vs PY Increase vs PY $2.22 Adj. NI Per Diluted Share 27% Increase vs PY 4.0x Net Debt to Adj. EBITDA 0.5x Leverage reduction 10

11 Strong Financial Performance Track Record Net Sales Operating EBITDA $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 $6,489 $ $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 $1,210 $ Shareholder Returns ~$57 >20% CAGR s under private ownership $ IPO Current Proven Track Record of Net Sales, Earnings, and Shareholder Return Growth 11 Dollars in millions Represents fiscal net sales and operating EBITDA for respective years

12 Cash Flow Highlights Components of Free Cash Flow LTM Jun-2017 Operating EBITDA $1,278 Capital expenditures (256) Cash interest expense (265) Taxes (1) (102) Working capital (42) Restructuring and other (2) (59) Adjusted free cash flow $554 $600 $550 $500 $450 $400 $350 $300 $250 $200 Projected and Actual FCF by Year + 42 $550 $ $475 $ $302 $320 $270 $243 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 Berry free cash flow yield 7.5% Packaging Peer Average (3) 5.2% Guidance Actual History of Achieving Free Cash Flow Guidance 12 Note: Dollars in millions (1) Includes tax receivable agreement payment in the LTM period ended Dec along with other cash taxes (2) Includes integration expenses and other business optimization costs (3) Packaging peer group includes: Aptar Group, Ball Corporation, Bemis, Crown Holdings, Graphic Packaging, Owens Illinois, Sealed Air, Silgan, and Sonoco. Packaging peer average based on the latest calculated public data available as of August 2, 2017

13 Strong Free Cash Flow Generation and Earnings Growth Results in Deleveraging Free Cash Flow Yield vs. Peer Group Leverage Ratio History and Target % 12.0% 10.0% 10.3% 12.1% 9.7% Equates to ~$82 per share stock price x 5.1x 4.5x 4.0x <4.0x 8.0% 7.5% 6.0% 5.2% % Berry Peer Avg. 2.0 FY 2015 Avintiv acq. FY 2016 Jun FY 2017 Goal September-14 September-15 September-16 June-17 Leverage Ratio Peer Average (2) Berry s FCF yield is 7.5% (1) still well above the peer group average of 5.2% (2) 1.1 reduction of net debt to Adjusted EBITDA since the Avintiv acquisition Top Priority Remains an Annual 0.5+ Reduction of Leverage Ratio to Reside Below 4x 13 (1) Based on shares outstanding and stock price as of the end of the Jun quarter (2) Packaging peer group includes: Aptar Group, Ball Corporation, Bemis, Crown Holdings, Graphic Packaging, Owens Illinois, Sealed Air, Silgan, and Sonoco. Packaging peer average based on the latest calculated public data available as of August 2, Approximate peer average leverage ratio

14 Supplemental Data (1) Adjusted EBITDA, adjusted free cash flow, and adjusted net income should not be considered in isolation or construed as an alternative to our net income (loss) or other measures as determined in accordance with GAAP. In addition, other companies in our industry or across different industries may calculate adjusted EBITDA, adjusted free cash flow, and adjusted net income and the related definitions differently than we do, limiting the usefulness of our calculation of adjusted EBITDA, adjusted free cash flow, and adjusted net income as comparative measures. EBIT, operating EBITDA, adjusted EBITDA, adjusted free cash flow, and adjusted net income are among the indicators used by the Company s management to measure the performance of the Company s operations and thus the Company s management believes such information may be useful to investors. Such measures are also among the criteria upon which performance-based compensation may be based 14

15 Engineered Materials Sales by End Markets Retail Agriculture & Other 12% 6% 33% Distribution Customers Industrial/ B&C 17% 32% Sales by Region (1) Food & Beverage NA 95% EMEA 4% Asia Pac 1% Product Categories Products Custom shrink films Retail bags Can liners Tapes Food contact films Stretch films Converter films Agriculture films 15 Berry estimates Not inclusive of all customers, products or categories (1) Estimated including the AEP Industries Inc. acquisition

16 Health, Hygiene, & Specialties Sales by End Markets Customers Healthcare/ Medical 18% 51% Personal care/ Hygiene Industrial/ Tech. Specialties 31% Sales by Region NA 51% EMEA 25% SA 14% Asia Pac 10% Product Applications Products Diapers Feminine care Medical gowns & masks Personal care wipes Infection prevention wipes Building wraps Geosynthetics Ag products Industrial wipes Adult incontinence 16 Berry estimates Not inclusive of all customers, products or applications

17 Consumer Packaging Sales by End Markets Customers Beverage 27% 40% Food Personal & Health Care 33% Sales by Region NA 100% Products Product Categories Containers Drink cups Bottles Prescription vials Tubes Closures Overcaps 17 Berry estimates Not inclusive of all customers, products or categories

18 Growing, Consumer-Centric End Markets Non-Woven Specialty Materials Customer Sample Engineered Materials Retail 3% 14% 9% 41% Health Care & Hygiene Beverage 12% 21% Products Sample Food Over 40% of sales in growing personal and health care markets with nearly 80% of sales in stable, consumer-oriented end markets #1 or #2 market position in ~75% of our FY 2016 net sales 18 Small sample of customers and products

19 Exhibit 1 Fiscal Year 2017 Adjusted Free Cash Flow Guidance Cash flow from operat ions $925 Less: capit al expendit ures (265) Less: t ax receivable agreement (110) Adjusted free cash flow $550 (1) Leverage Ratio Goal of Below 4x 19 Note: All dollar amounts in millions (1) Includes tax receivable payment made in October 2017 of $60 million and an anticipated $50 million payment to be made at the end of our September 2017 quarter

20 Exhibit 2 Tax Structure and Tax Receivable Agreement (TRA) TRA The Company currently remits 85% of its utilized NOLs to shareholders of record immediately prior to our IPO; essentially a cash tax payer with a 15% discount. We have $123 million remaining on the tax receivable agreement as of the end of the Jun-17 quarter. We anticipate paying $50 million of the TRA at the end of the Sept-17 quarter thus mitigating the potential negative impact of incremental cash taxes in FY 18. AVINTIV NOLs After utilization of the pre-ipo NOLs covered by the TRA, we will then use up the approximate $500 million of federal NOLs included in the AVINTIV acquisition We believe that we will utilize approximately half of the Avintiv acquired NOL s over the next 5 years. We estimate our fiscal 2017 effective tax rate to be ~30% 20

21 Exhibit 3 Fiscal Year 2016 Net Sales and Operating EBITDA Recasts for Product Category Changes NET SALES Q1 16 Q2 16 Q3 16 Q4 16 Consumer Packaging $ (79) $ (78) $ (73) $ (76) Engineered Materials Health, Hygiene & Spec Operating EBITDA Q1 16 Q2 16 Q3 16 Q4 16 Consumer Packaging $ (9) $ (11) $ (9) $ (9) Engineered Materials - 4 (1) 1 Health, Hygiene & Spec Note: Dollars in millions

22 Non-GAAP Financial Measure Actual Original Guidance Actual Original Guidance Actual Original Guidance Actual LTM Guidance FY 2013 FY 2014 FY 2014 FY 2015 FY 2015 FY 2016 FY 2016 Jun 2017 FY 2017 Cash flow from operations $464 $532 $530 $589 $637 $817 $857 $870 $925 Capital expenditures, net (221) (230) (196) (230) (162) (285) (283) (256) (265) Payment of tax receivable agreement - (32) (32) (39) (39) (57) (57) (60) (110) Adjusted free cash flow $243 $270 $302 $320 $436 $475 $517 $554 $ Note: Dollars in millions

23 Non-GAAP Reconciliation Quarterly Period Ended Four Quarters Ended July 1, 2017 July 2, 2016 July 1, 2017 Consolidated net income $107 $96 $307 Add: other expense (income), net (1) (14) 17 Add: interest expense, net Add: income tax expense (benefit) Operating income $212 $179 $684 Add: non-cash amortization from 2006 private sale Add: restructuring and impairment Add: other non-cash charges (1) Add: business optimization costs (2) Adjusted operating income (7) $240 $204 $792 Add: depreciation Add: amortization of intangibles (3) Operating EBITDA (7) $364 $316 $1,278 Add: acquisitions (4) 60 Add: unrealized cost savings (5) 64 Adjusted EBITDA (7) $1,402 Net income per diluted share $0.79 $0.76 Other expense (income), net (0.01) (0.11) Non-cash amortization from 2006 private sale Restructuring and impairment Other non-cash charges (1) Business optimization costs (2) Income tax impact on items above (6) (0.06) (0.03) Adjusted net income per diluted share (7) $0.93 $ Note: Dollars in millions. Unaudited * See next page for footnote disclosures

24 Non-GAAP Reconciliation (1) Other non-cash charges in the June 2017 quarter primarily include $5 million of stock compensation expense and other non-cash charges. Other noncash charges in the June 2016 quarter primarily includes $3 million of stock compensation expense and $3 million step up of inventory to fair value related to the Avintiv acquisition along with other non-cash charges. Other non-cash charges for the four quarters ended June 2017 primarily include $19 million of stock compensation expense, $5 million step-up of inventory to fair value related to the AEP Industries Inc. acquisition and other non-cash charges. (2) Includes integration expenses and other business optimization costs. (3) Amortization excludes non-cash amortization from the 2006 private sale of $8 million for both the July 1, 2017 and July 2, 2016 quarters and $32 million for the four quarters ended July 1, (4) Represents Operating EBITDA for AEP for the period of July 2016 to January, and Adchem for the period of July 2016 to June (5) Primarily represents unrealized cost savings related to acquisitions. (6) Income tax effects on adjusted net income were calculated using 32% for the June 2017 and 2016 quarters. The rates used for each represents the Company s expected effective tax rate for each respective period. (8) Supplemental financial measures that are not required by, or presented in accordance with, accounting principles generally accepted in the United States ( GAAP ). These non-gaap financial measures should not be considered as alternatives to operating or net income or cash flows from operating activities, in each case determined in accordance with GAAP. Adjusted EBITDA is used by our lenders for debt covenant compliance purposes. Our projected adjusted free cash flow for fiscal 2017 assumes $925 million of cash flow from operations less $265 million of net additions to property, plant, and equipment and $110 million of payments under our tax receivable agreement. We define adjusted free cash flow as cash flow from operating activities less additions to property, plant, and equipment and payments under the tax receivable agreement. We believe adjusted free cash flow is useful to an investor in evaluating our liquidity because adjusted free cash flow and similar measures are widely used by investors, securities analysts, and other interested parties in our industry to measure a company s liquidity. We also believe these measures are useful to an investor in evaluating our performance and liquidity as these measures are widely used by investors, securities analysts and other interested parties in our industry to measure a company s performance and liquidity without regard to revenue and expense recognition, which can vary depending upon accounting methods. These non-gaap financial measures may be calculated differently by other companies, including other companies in our industry, limiting their usefulness as comparative measures 24

25 Dustin M. Stilwell Director, Head of Investor Relations Berry Global Group, Inc. 101 Oakley Street, 3 rd floor P. O. Box 959 Evansville, IN Tel: ir@berryglobal.com