INVESTOR PRESENTATION

Transcription

1 May 2015 INVESTOR PRESENTATION August 2016 NYSE: BERY

2 Safe Harbor Statements Forward-Looking Statements This presentation contains forward-looking statements which involve risks and uncertainties. You can identify forward-looking statements because they contain words such as believes, expects, may, will, should, would, could, seeks, approximately, intends, plans, estimates, anticipates outlook, or looking forward, or similar expressions that relate to our strategy, plans or intentions. All statements we make relating to our estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates and financial results or to our expectations regarding future industry trends are forward-looking statements. In addition, we, through our senior management, from time to time make forward-looking public statements concerning our expected future operations and performance and other developments. These forwardlooking 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 presentation. 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 the Avintiv acquisition, 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 as a result of the Avintiv acquisition, including foreign currency exchange rate risk and the risks of compliance with applicable export controls, sanctions, anti-corruption 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 presentation. 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 intended to supplement, not substitute for, comparable measures. Reconciliations of non GAAP financial measures to GAAP financial measures are provided at the end of the presentation. Investors are urged to consider carefully the comparable GAAP measures and the reconciliations to those measures provided. 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 performance-based 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. 2

3 Overview Significant Scale Global leadership position in plastics packaging and engineered specialty materials with advanced technologies, material, and commercial capabilities 115 facilities strategically located throughout the world Resin purchases of ~ 3.5 billion pounds annually Attractive Growth Characteristics Highest growth substrate focused in stable end markets Creating breakthrough products and technologies Strong Free Cash Flow Profile Four quarters ended June 2016 results: Adjusted free cash flow of $475 million (~10% FCF yield) (1) Net sales of $6.6 billion (2) Adj. EBITDA of $1,212 million (>18% margin) (1) Fiscal 2016 Adjusted Free Cash Flow Guidance of $475 million (1) (1) See reconciliation within this presentation (2) Includes unaudited net sales for AVINTIV from July 2015-September

4 Diverse Customer Base Servicing Growing, Consumer-Centric End Markets Sales by End Market Nearly 40% of sales in growing personal and health care markets with 80% of sales in stable, consumeroriented end markets Engineered Materials Household Chemical & Other 14% 20% 29% 37% Personal & Health Care Low Customer Concentration Longstanding relationships with diverse mix of leading multi-national, regional, and local customers Over 13,000 customers; top single customer represents ~4% of net sales with the top 10 customers representing <19 % of net sales Food & Beverage Sales by Region Operating Divisions North America -81% EMEA 9% South America 6% Asia Pacific 4% Engineered Materials 20% 45% Consumer Packaging Health, Hygiene & Specialties 35% Note: Customer concentration based on pro forma net sales; sample list of customers to which we have sold products in the last 2 years 4

5 Consumer Packaging (CP) (45% of Total Sales) Sales by End Markets Customers Household Chemical & Other Personal & Health Care 24% 8% 68% Food and Beverage Sales by Region NA 100% Product Categories Products Containers Drink cups Bottles Prescription vials Tubes Closures Overcaps Custom shrink films Berry estimates Not inclusive of all customers, products or categories 5

6 Health, Hygiene, & Specialties (HH&S) (35% of Total Sales) Sales by End Markets Customers Healthcare/ Medical 18% Personal care/ Hygiene 58% 24% Industrial/ Tech. Specialties Sales by Region NA - 51% EMEA 23% SA - 16% 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 Berry estimates Not inclusive of all customers, products or applications 6

7 Engineered Materials (EM) (20% of Total Sales) Sales by End Markets Customers Agriculture & Other 12% Converter 13% 61% Industrial/ B&C Retail 14% Sales by Region NA 91% EMEA 7% Asia Pac 2% Product Categories Products Corrosion protection Retail bags Inst. can liners Tapes PVC films Stretch films Converter films Agriculture films Berry estimates Not inclusive of all customers, products or categories 7

8 2016 Highlights Three Fiscal Quarters Ended CF From Operations 45% Increase vs PY (1) Adj. FCF 16% Increase vs PY Operating Income 43% Increase vs PY (1) Operating EBITDA 49% Increase vs PY Operating EBITDA Margin 210bps Improvement vs PY Net Debt to Adj. EBITDA 0.4x Leverage reduction (1) See reconciliation within this presentation 8

9 Contractual Pass-Through Drives Earnings Stability Resin Price Pass-Through Mechanisms Other 75% Contractual Pass-Through Market Based Bi-Monthly 5% 25% 10% 30% 30% Monthly Quarterly Resin Primary Raw Material Resin comprises approximately 50% of cost of goods sold Roughly 55% Polypropylene (PP) and 45% Polyethylene (PE) Vast majority of resin movements passed through to customers in a timely manner 75% of resin pounds sold are contractual pass-through with income statement timing lag of ~1 month (2) Resin Prices (in cents) $59 $64 PP PE $37 $79 $171 $180 $150 $120 $90 $60 $30 Cumulative $ Price/Cost Spread 60.0 $- (1) Represents reported four quarters ended adjusted EBITDA margin reflecting acquisition adjusted EBITDA and unrealized cost reductions (2) Represents timing difference between selling price change and resin cost impact to income statement Source: Berry management and CDI 9

10 Cash Flow Highlights Components of Free Cash Flow Projected and Actual FCF by Year LTM Jun-2016 Adjusted EBITDA $1,212 Pro forma adjustments (1) (98) Operating EBITDA $1,114 $500 $450 $ $436 $475 Capital expenditures (280) Cash interest expense (252) Taxes (2) (107) Working capital 69 Restructuring and other (3) (69) $350 $300 $250 $ $270 $302 $320 Adjusted free cash flow $475 $200 FY 2013 FY 2014 FY 2015 FY 2016 Guidance Berry free cash flow yield 10.1% Packaging Peer Average (4) 5.6% Original Guidance Actual Adj. FCF (5) History of Exceeding Free Cash Flow Guidance Note: Dollars in millions, except per share amounts. (1) Pro forma adjustments include Operating EBITDA and unrealized cost savings from the Avintiv acquisition (2) Includes tax receivable agreement payment in FY 16 Guidance of $57 million made in October 2015 and other cash taxes (3) Includes integration expenses and other business optimization costs (4) 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 8,

11 Strong Free Cash Flow Generation and Earnings Growth Results in Deleveraging Free Cash Flow Yield vs. Peer Group Proven Track Record of Deleveraging x 12.0% % 9.8% 10.1% x 8.0% 6.0% 6.3% 5.6% x -0.2x -0.4x -0.6x -0.5x 4.0% Berry June-15 June-16 Peer Avg. - FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Goal Leverage Reduction Avg Berry s FCF yield is 10.1% (1) -well above the peer group average of 5.6% (2) (5) 0.4 reduction of net debt to Adjusted EBITDA through three quarters FY 16 Top Priority Remains Reduction of Net Debt to Adjusted EBITDA Residing in a 3-4x Range (1) Based on shares outstanding and stock price as of the end of the June 2016 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 8,

12 Long-Term Vision to Maximize Shareholder Value Sustainable Competitive Advantages Proven Organic Growth Strategy Long-standing Diversified Multi-National Customer Base Proven Acquisition Growth Strategy Leading Position in Many Product Lines Consistently Strong Financial Performance Deep and Experienced Management Team 12

13 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. 13

14 Exhibit 1 Fiscal Year 2016 Adjusted Free Cash Flow Target Operating EBITDA Adjusted Free Cash Flow $1,200 million $ 475 million Prior Year 2016 Guidance Cash flow from operations $637 $817 less: additions to property, plant, and equipment, net (162) (285) less: tax receivable agreement (39) (57) Adjusted free cash flow $436 $475 14

15 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. Assuming no changes in tax regulations, we project that this will be the situation for the next 2-3 years. AVINTIV NOLs After utilization of the pre-ipo NOLs covered by the TRA, we will then use up the approximate $400 million of federal NOLs included in the AVINTIV acquisition After all NOLs are depleted we would then effectively become a full cash tax payer. We estimate our fiscal 2016 effective tax rate to be ~30% Berry estimates 15

16 Non-GAAP Reconciliation Three Quarters Ended June 2016 Four Quarters Ended Net income $159 $207 Add: debt extinguishment 4 4 Add: other expense, net (21) (22) Add: interest expense, net Add: income tax expense Operating income $430 $537 Add: non-cash amortization from 2006 private sale Add: restructuring and impairment Add: other non-cash charges Add: business optimization costs (1) Adjusted operating income $543 $669 Add: depreciation Add: amortization of intangibles (2) Operating EBITDA $909 $1,114 Add: pro forma acquisitions 70 Add: unrealized cost savings 28 Adjusted EBITDA $1,212 Cash flow from operations $567 $812 Capital expenditures, net (224) (280) Payment of tax receivable agreement (57) (57) Adjusted free cash flow $286 $475 Note: Dollars in millions. Unaudited (1) Includes integration expenses and other optimization costs. (2) Amortization excludes the non-cash amortization from the 2006 private sale of $24 million and $32 million for the three and four quarters ended June 2016, respectively. 16

17 Non-GAAP Financial Measure Actual Original Guidance Actual Original Guidance Actual FY 2013 FY 2014 FY 2014 FY 2015 FY 2015 Cash flow from operations $464 $532 $530 $589 $637 Capital expenditures, net (221) (230) (196) (230) (162) Payment of tax receivable agreement - (32) (32) (39) (39) Adjusted free cash flow $243 $270 $302 $320 $436 Note: Dollars in millions. Unaudited 17

18 Dustin M. Stilwell Director, Head of Investor Relations Berry Plastics Group, Inc. 101 Oakley Street, 3 rd floor P. O. Box 959 Evansville, IN Tel: ir@berryplastics.com 18