Berry Plastics Reports 1Q 2017 Results

Berry Plastics Group, Inc. reported results for its first fiscal 2017 quarter, referred to in the following as the December 2016 quarter.
 
Net income for the December 2016 quarter was $51 million ($0.40 per diluted share) compared to $4 million ($0.03 per diluted share) in the prior year quarter. Adjusted net income in the December 2016 quarter was more than 40% higher at $0.50 per diluted share compared to $0.35 per diluted share in the prior year quarter.
 
Net sales for 1Q 2017 were $1.502 billion, a 7% decrease from 2015. Operating income for the quarter increased by 70% to $146 million compared to $86 million in the prior year quarter. Operating EBITDA was a record for any December quarter in the company’s history at $277 million (18.4% of net sales) compared to $276 million (17.1% of net sales) in the December 2015 quarter.
 
Cash flow from operations for the last four quarters ended December 2016 was $809 million. Adjusted free cash flow for the last four quarters ended was $492 million.
 
“I am pleased to report we achieved record operating EBITDA for any December quarter in the company’s history. Our results this quarter were driven by growth in our Health, Hygiene, and Specialties division and strong operating performance in our Engineered Materials division,” said Tom Salmon, CEO of Berry Plastics.
 
The net sales decrease of $110 million from the prior year quarter is primarily attributable to a $98 million negative impact from the extra days in the prior year quarter, an unfavorable impact from currency translation, and a decline in selling prices.
 
The operating income increase of $60 million from the prior year quarter is primarily attributed to a decrease in acquisition related costs, restructuring and impairment costs, depreciation and amortization expense along with lower selling, general, and administrative expenses.
 
Health, Hygiene, and Specialties’ net sales were $570 million, a decrease of $30 million from the prior year quarter. Consumer Packaging’s net sales were $549 million, a decrease of $55 million from the prior year quarter. Engineered Materials’ sales were $383 million, a decrease of $25 million.
 
Berry Plastics’ cash from operating activities was $143 million for the December 2016 quarter and $809 million for the last four quarters ended December 2016. The company’s adjusted free cash flow for the last four quarters ended was $492 million. Its total debt less cash and cash equivalents at the end of the December 2016 quarter was $5,422 million. Adjusted EBITDA for the four quarters ended December 31, 2016 was $1,230 million.
 
Subsequent to the end of the first fiscal quarter, on Jan. 20, 2017, Berry Plastics completed its previously announced acquisition of AEP Industries Inc. for a purchase price of approximately 6.5 million common shares and approximately $297 million in exchange for all the outstanding shares of AEP common stock and equity awards. Additionally, Berry paid $164 million to retire outstanding AEP debt.
 
“Looking ahead, we will continue our focus on reducing our leverage ratio to a goal of below 4, on or before the end of fiscal 2017. Additionally we remain excited about our recent acquisition of AEP, which closed on January 20th and believe our synergy targets are very achievable. The improvements as a result of the acquisition of AEP, we believe, will not only positively impact our Engineered Materials division but will also add scale benefits to each of our three operating divisions,” said Salmon.