UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 29, 2024

OR

☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number 001-35672
graphic

BERRY GLOBAL GROUP, INC.

A Delaware corporation
 101 Oakley Street, Evansville, Indiana, 47710
(812) 424-2904
 IRS employer identification number
20-5234618

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value per share
BERY
New York Stock Exchange LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes ☒ No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☒
Accelerated Filer ☐
Non-Accelerated Filer ☐
Smaller Reporting Company ☐
Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐  No  ☒

There were 114.6 million shares of common stock outstanding at August 2, 2024.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

Information included or incorporated by reference in Berry Global Group, Inc.’s filings with the U.S. Securities and Exchange Commission (the “SEC”) and press releases or other public statements contains or may contain forward-looking statements.  This report includes “forward-looking” statements with respect to our financial condition, results of operations and business and our expectations or beliefs concerning future events.  These statements contain words such as “believes,” “expects,” “may,” “will,” “should,” “would,” “could,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” “project,” “outlook,” “anticipates” or “looking forward” or similar expressions that relate to our strategy, plans, intentions, or expectations.  All statements we make relating to our estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates, and financial results or to our expectations regarding future industry trends are forward-looking statements.  In addition, we, through our senior management, from time to time make forward-looking public statements concerning our expected future operations and performance and other developments.  These forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those that we expected.  All forward-looking statements are made only as of the date hereof, and we undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

Additionally, we caution readers that the list of important factors discussed in our most recent Form 10-K in the section titled “Risk Factors” and subsequent periodic reports filed with the SEC may not contain all of the material factors that are important to you.  In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this report may not in fact occur.  Accordingly, readers should not place undue reliance on those statements.

2
Berry Global Group, Inc.
Form 10-Q Index
For Quarterly Period Ended June 29, 2024

Part I.
Financial Information
Page No.
 
Item 1.
Financial Statements:
  
   
4
   
5
   
6
   
7
   
8
 
Item 2.
15
 
Item 3.
20
 
Item 4.
20
Part II.
Other Information
  
 
Item 1.
21
 
Item 1A.
21
 
Item 2.
21
 
Item 5.
21
 
Item 6.
22
 
23


3
Index

Part I. Financial Information

Item 1.
Financial Statements
Berry Global Group, Inc.
Consolidated Statements of Income
(Unaudited)
(in millions of dollars, except per share amounts)

   
Quarterly Period Ended
    
Three Quarterly Periods Ended
  
   
June 29, 2024
    
July 1, 2023
    
June 29, 2024
    
July 1, 2023
  
Net sales
  
$
3,161
    
$
3,229
    
$
9,090
    
$
9,577
  
Costs and expenses:
                                
Cost of goods sold
    
2,560
      
2,649
      
7,448
      
7,873
  
Selling, general and administrative
    
216
      
215
      
664
      
671
  
Amortization of intangibles
    
58
      
61
      
177
      
181
  
Restructuring and transaction activities
    
24
      
37
      
133
      
74
  
Operating income
    
303
      
267
      
668
      
778
  
Other expense (income)
    
(5
)
    
11
      
8
      
13
  
Interest expense
    
77
      
78
      
225
      
228
  
Income before income taxes
    
231
      
178
      
435
      
537
  
Income tax expense
    
38
      
35
      
67
      
114
  
Net income
  
$
193
    
$
143
    
$
368
    
$
423
  
                                 
Net income per share:
                                
Basic
  
$
1.69
    
$
1.20
    
$
3.19
    
$
3.50
  
Diluted
    
1.65
      
1.18
      
3.11
      
3.47
  






Consolidated Statements of Comprehensive Income
(Unaudited)
(in millions of dollars)

   
Quarterly Period Ended
    
Three Quarterly Periods Ended
  
   
June 29, 2024
    
July 1, 2023
    
June 29, 2024
    
July 1, 2023
  
Net income
  
$
193
    
$
143
    
$
368
    
$
423
  
Other comprehensive income (loss), net of tax:
                                
Currency translation
    
(63
)
    
23
      
6
      
224
  
Derivative instruments
    
(6
)
    
31
      
(65
)
    
(1
)
Other comprehensive income (loss)
    
(69
)
    
54
      
(59
)
    
223
  
Comprehensive income
  
$
124
    
$
197
    
$
309
    
$
646
  

See notes to consolidated financial statements.

4
Index

Berry Global Group, Inc.
Consolidated Balance Sheets
(in millions of dollars)

   
June 29, 2024
    
September 30, 2023
  
   
(Unaudited)
        
Assets
            
Current assets:
            
Cash and cash equivalents
  
$
509
    
$
1,203
  
Accounts receivable
    
1,630
      
1,568
  
Finished goods
    
1,047
      
933
  
Raw materials and supplies
    
632
      
624
  
Prepaid expenses and other current assets
    
318
      
205
  
Total current assets
    
4,136
      
4,533
  
Noncurrent assets:
                
Property, plant and equipment
    
4,558
      
4,576
  
Goodwill and intangible assets
    
6,558
      
6,684
  
Right-of-use assets
    
619
      
625
  
Other assets
    
117
      
169
  
Total assets
  
$
15,988
    
$
16,587
  
                 
                 
Liabilities and stockholders’ equity
                
Current liabilities:
                
Accounts payable
  
$
1,242
    
$
1,528
  
Accrued employee costs
    
234
      
273
  
Other current liabilities
    
769
      
902
  
Current portion of long-term debt
    
23
      
10
  
Total current liabilities
    
2,268
      
2,713
  
Noncurrent liabilities:
                
Long-term debt
    
8,676
      
8,970
  
Deferred income taxes
    
453
      
573
  
Employee benefit obligations
    
186
      
193
  
Operating lease liabilities
    
510
      
525
  
Other long-term liabilities
    
524
      
397
  
Total liabilities
    
12,617
      
13,371
  
                 
Stockholders’ equity:
                
Common stock (114.6 and 115.5 million shares issued, respectively)
    
1
      
1
  
Additional paid-in capital
    
1,294
      
1,231
  
Retained earnings
    
2,471
      
2,320
  
Accumulated other comprehensive loss
    
(395
)
    
(336
)
Total stockholders’ equity
    
3,371
      
3,216
  
Total liabilities and stockholders’ equity
  
$
15,988
    
$
16,587
  

See notes to consolidated financial statements.

5
Index

Berry Global Group, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(in millions of dollars)

   
Three Quarterly Periods Ended
  
   
June 29, 2024
    
July 1, 2023
  
Cash Flows from Operating Activities:
            
Net income
  
$
368
    
$
423
  
Adjustments to reconcile net cash from operating activities:
                
Depreciation
    
463
      
425
  
Amortization of intangibles
    
177
      
181
  
Non-cash interest (income), net
    
(61
)
    
(45
)
Settlement of derivatives
    
27
      
36
  
Deferred income tax
    
(78
)
    
(94
)
Share-based compensation expense
    
38
      
36
  
Loss on divestitures
    
57
      
—
  
Other non-cash operating activities, net
    
14
      
18
  
Changes in working capital
    
(700
)
    
(473
)
Changes in other assets and liabilities
    
(8
)
    
(17
)
Net cash from operating activities
    
297
      
490
  
                 
Cash Flows from Investing Activities:
                
Additions to property, plant and equipment, net
    
(473
)
    
(560
)
Divestiture of business
    
47
      
—
  
Acquisition of business and other
    
(68
)
    
(88
)
Net cash from investing activities
    
(494
)
    
(648
)
                 
Cash Flows from Financing Activities:
                
Proceeds from long-term borrowings
    
3,150
      
500
  
Repayments on long-term borrowings
    
(3,441
)
    
(687
)
Proceeds from issuance of common stock
    
33
      
26
  
Repurchase of common stock
    
(117
)
    
(415
)
Dividends paid
    
(104
)
    
(97
)
Other, net
    
(22
)
    
7
  
Net cash from financing activities
    
(501
)
    
(666
)
Effect of currency translation on cash
    
4
      
47
  
Net change in cash and cash equivalents
    
(694
)
    
(777
)
Cash and cash equivalents at beginning of period
    
1,203
      
1,410
  
Cash and cash equivalents at end of period
  
$
509
    
$
633
  

See notes to consolidated financial statements.

6
Index

Berry Global Group, Inc.
Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
(in millions of dollars)

 
Quarterly Period Ended
  
Common
Stock
    
Additional
Paid-in Capital
    
Accumulated Other
Comprehensive Loss
    
Retained
Earnings
    
Total
  
Balance at March 30, 2024
  
$
1
    
$
1,279
    
$
(326
)
  
$
2,340
    
$
3,294
  
Net income
    
—
      
—
      
—
      
193
      
193
  
Other comprehensive (loss)
    
—
      
—
      
(69
)
    
—
      
(69
)
Share-based compensation
    
—
      
8
      
—
      
—
      
8
  
Proceeds from issuance of common stock
    
—
      
8
      
—
      
—
      
8
  
Common stock repurchased and other
    
—
      
(1
)
    
—
      
(28
)
    
(29
)
Dividends paid
    
—
      
—
      
—
      
(34
)
    
(34
)
Balance at June 29, 2024
  
$
1
    
$
1,294
    
$
(395
)
  
$
2,471
    
$
3,371
  
                                         
Balance at April 1, 2023
  
$
1
    
$
1,214
    
$
(234
)
  
$
2,314
    
$
3,295
  
Net income
    
—
      
—
      
—
      
143
      
143
  
Other comprehensive income
    
—
      
—
      
54
      
—
      
54
  
Share-based compensation
    
—
      
6
      
—
      
—
      
6
  
Proceeds from issuance of common stock
    
—
      
8
      
—
      
—
      
8
  
Common stock repurchased and other
    
—
      
(6
)
    
—
      
(81
)
    
(87
)
Dividends paid
    
—
      
—
      
—
      
(32
)
    
(32
)
Balance at July 1, 2023
  
$
1
    
$
1,222
    
$
(180
)
  
$
2,344
    
$
3,387
  

 
Three Quarterly Periods Ended
  
Common
Stock
    
Additional
Paid-in Capital
    
Accumulated Other
Comprehensive Loss
    
Retained
Earnings
    
Total
  
Balance at September 30, 2023
  
$
1
    
$
1,231
    
$
(336
)
  
$
2,320
    
$
3,216
  
Net income
    
—
      
—
      
—
      
368
      
368
  
Other comprehensive (loss)
    
—
      
—
      
(59
)
    
—
      
(59
)
Share-based compensation
    
—
      
38
      
—
      
—
      
38
  
Proceeds from issuance of common stock
    
—
      
29
      
—
      
—
      
29
  
Common stock repurchased and other
    
—
      
(4
)
    
—
      
(113
)
    
(117
)
Dividends paid
    
—
      
—
      
—
      
(104
)
    
(104
)
Balance at June 29, 2024
  
$
1
    
$
1,294
    
$
(395
)
  
$
2,471
    
$
3,371
  
                                         
Balance at October 1, 2022
  
$
1
    
$
1,177
    
$
(403
)
  
$
2,421
    
$
3,196
  
Net income
    
—
      
—
      
—
      
423
      
423
  
Other comprehensive income
    
—
      
—
      
223
      
—
      
223
  
Share-based compensation
    
—
      
36
      
—
      
—
      
36
  
Proceeds from issuance of common stock
    
—
      
26
      
—
      
—
      
26
  
Common stock repurchased and other
    
—
      
(17
)
    
—
      
(403
)
    
(420
)
Dividends paid
    
—
      
—
      
—
      
(97
)
    
(97
)
Balance at July 1, 2023
  
$
1
    
$
1,222
    
$
(180
)
  
$
2,344
    
$
3,387
  


See notes to consolidated financial statements.

7
Index

Berry Global Group, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
(tables in millions of dollars, except per share data)


1.  Basis of Presentation

The accompanying unaudited Consolidated Financial Statements of Berry Global Group, Inc. (“the Company,” “we,” or “Berry”) have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") for interim reporting.  Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.  In preparing financial statements in conformity with GAAP, we must make estimates and assumptions that affect the reported amounts and disclosures at the date of the financial statements and during the reporting period.  Actual results could differ from those estimates.  In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included, and all subsequent events up to the time of the filing have been evaluated.  For further information, refer to the Company’s most recent Form 10-K filed with the SEC.

2.  Revenue and Accounts Receivable


Our revenues are primarily derived from the sale of non-woven, flexible and rigid products to customers.  Revenue is recognized when performance obligations are satisfied, in an amount reflecting the consideration to which the Company expects to be entitled.  We consider the promise to transfer products to be our sole performance obligation.  If the consideration agreed to in a contract includes a variable amount, we estimate the amount of consideration we expect to be entitled to in exchange for transferring the promised goods to the customer using the most likely amount method.  Our main source of variable consideration is customer rebates.  There are no material instances where variable consideration is constrained and not recorded at the initial time of sale.  Generally, our revenue is recognized at a point in time for standard promised goods at the time of shipment, when title and risk of loss pass to the customer.  The accrual for customer rebates was $106 million at both June 29, 2024 and September 30, 2023, and is included in Other current liabilities on the Consolidated Balance Sheets.  The Company disaggregates revenue based on reportable business segment, geography, and significant product line.  Refer to Note 10. Segment and Geographic Data for further information.


Accounts receivable are presented net of allowance for credit losses of $19 million at both June 29, 2024 and September 30, 2023.  The Company records its current expected credit losses based on a variety of factors including historical loss experience and current customer financial condition.  The changes to our current expected credit losses, write-off activity, and recoveries were not material for any of the periods presented.


The Company has entered into various factoring agreements, including customer-based supply chain financing programs, to sell certain receivables to third-party financial institutions.  Agreements which result in true sales of the transferred receivables, which occur when receivables are transferred without recourse to the Company, are reflected as a reduction of accounts receivable on the Consolidated Balance Sheets and the proceeds are included in the Cash Flows from Operating Activities in the Consolidated Statements of Cash Flows.  The fees associated with the transfer of receivables for all programs were not material for any of the periods presented.


3.  Acquisition

In April 2024, the Company acquired F&S Tool Inc. (“F&S”), a leading manufacturer of high output, high efficiency injection molding applications, for a purchase price of $68 million.  The acquired business is operated within the Consumer Packaging North America segment.  To finance the purchase, the Company used existing liquidity.  The acquisition has been accounted for under the purchase method of accounting and accordingly, the purchase price has been allocated to the identifiable assets and liabilities based on preliminary values at the acquisition date.  The Company has recognized $48 million of goodwill on this transaction primarily as a result of expected cost synergies and does not expect goodwill to be deductible for tax purposes.

4.  Divestitures and Spin-off

During fiscal 2024, the Company completed the sale of its Strata and Promens Vehicles businesses, which were operated in the Consumer Packaging International segment for net proceeds of $25 million and $22 million, respectively.  In fiscal 2023, the Strata business recorded net sales of $56 million and Promens Vehicles recorded $111 million.
8
Index
In February 2024, the Company announced plans for a spin-off and merger of our Health, Hygiene & Specialties Global Nonwovens and Films business (“HHNF”) with Glatfelter Corporation (“GLT”).  Upon the completion of the transaction, shareholders of Berry will own approximately ninety percent of the new combined company in addition to their continuing interest in Berry. The transaction is subject to certain customary closing conditions including, but not limited to, approval by GLT shareholders and, the effective filing of related registration statements.

5.  Restructuring and Transaction Activities

During fiscal 2023, the Company announced several plant rationalizations in all four segments in order to deliver cost savings and optimize equipment utilization. Over the duration of the plan, these plant rationalizations and other cost reduction actions are projected to cost approximately $250 million with the operations savings intended to counter general economic softness.  The plant rationalizations are expected to be fully implemented by the end of fiscal 2025.

The table below includes the significant components of our restructuring and transaction activities, by reporting segment:

 
Quarterly Period Ended
    
Three Quarterly Periods Ended
    
Restructuring Plans
  
   
June 29, 2024
    
July 1, 2023
    
June 29, 2024
    
July 1, 2023
    
Life to date (a)
  
Consumer Packaging International
  
$
11
    
$
17
    
$
90
    
$
32
      
83
  
Consumer Packaging North America
    
6
      
6
      
17
      
14
      
40
  
Health, Hygiene & Specialties
    
5
      
12
      
23
      
21
      
30
  
Flexibles
    
2
      
2
      
3
      
7
      
25
  
Consolidated
  
$
24
    
$
37
    
$
133
    
$
74
      
178
  

(a) Excludes $57 million loss on divestitures (See Note 4)

The table below sets forth the activity with respect to the restructuring and transaction activities accrual at June 29, 2024:

 
Restructuring
              
   
Employee
Severance
and Benefits
    
Facility
Exit Costs
    
Non-cash
Impairment
Charges
    
Transaction
Activities
    
Total
  
Balance as of September 30, 2023
  
$
10
    
$
1
    
$
—
    
$
—
    
$
11
  
Charges
    
22
      
26
      
8
      
77
      
133
  
Non-cash items
    
—
      
—
      
(8
)
    
(57
)
    
(65
)
Cash
    
(16
)
    
(27
)
    
—
      
(20
)
    
(63
)
Balance as of June 29, 2024
  
$
16
    
$
—
    
$
—
    
$
—
    
$
16
  

6.  Leases

The Company leases certain manufacturing facilities, warehouses, office space, manufacturing equipment, office equipment, and automobiles.

Supplemental lease information is as follows:

Leases
Classification
  
June 29, 2024
    
September 30, 2023
  
Operating leases:
              
Operating lease right-of-use assets
Right-of-use assets
  
$
619
    
$
625
  
Current operating lease liabilities
Other current liabilities
    
125
      
116
  
Noncurrent operating lease liabilities
Operating lease liability
    
510
      
525
  
Finance leases:
                  
Finance lease right-of-use assets
Property, plant, and equipment, net
  
$
32
    
$
32
  
Current finance lease liability
Current portion of long-term debt
    
7
      
9
  
Noncurrent finance lease liabilities
Long-term debt, less current portion
    
21
      
19
  

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Index
7.  Long-Term Debt

Long-term debt consists of the following:

Facility
Maturity Date
  
June 29, 2024
    
September 30, 2023
  
Term loan (a)
July 2026
  
$
440
    
$
3,090
  
Term loan (a)
July 2029
    
1,538
      
—
  
Revolving line of credit
June 2028
    
—
      
—
  
1.00% First Priority Senior Secured Notes (b)(c)
January 2025
    
750
      
741
  
1.57% First Priority Senior Secured Notes
January 2026
    
1,525
      
1,525
  
4.875% First Priority Senior Secured Notes
July 2026
    
750
      
1,250
  
1.65% First Priority Senior Secured Notes
January 2027
    
400
      
400
  
1.50% First Priority Senior Secured Notes (b)
January 2027
    
402
      
397
  
5.50% First Priority Senior Secured Notes
April 2028
    
500
      
500
  
5.80% First Priority Senior Secured Notes
June 2031
    
800
      
—
  
5.65% First Priority Senior Secured Notes
January 2034
    
800
      
—
  
4.50% Second Priority Senior Secured Notes
February 2026
    
291
      
291
  
5.625% Second Priority Senior Secured Notes
July 2027
    
500
      
500
  
Debt discounts and deferred fees
      
(36
)
    
(34
)
Finance leases and other
Various
    
39
      
41
  
Retired debt
      
—
      
279
  
Total long-term debt
      
8,699
      
8,980
  
Current portion of long-term debt
      
(23
)
    
(10
)
Long-term debt, less current portion
    
$
8,676
    
$
8,970
  
(a)
Interest rates on term loans are effectively 68% fixed with interest rate swaps (see Note 8).
(b)
Euro denominated
(c)
Indicates debt which has been classified as long-term debt in accordance with the Company’s ability and intention to refinance such obligations on a long-term basis.

During fiscal 2024, the Company extended the maturity date of $1,550 million of its outstanding term loans to July 2029. In addition, the Company issued $800 million aggregate principal amount of 5.65% First Priority Senior Secured Notes due 2034, and another $800 million aggregate principal amount of 5.80% First Priority Senior Secured Notes due 2031.  The proceeds from the 5.65% First Priority Notes were used to prepay the 0.95% First Priority Senior Secured Notes due in February 2024 and a portion of the existing term loan due in July 2026. The proceeds from the 5.80% First Priority Notes were used to repurchase a portion of the 4.875% First Priority Senior Secured Notes due in July 2026 and to prepay a portion of the existing term loan due in July 2026.

Debt discounts and deferred financing fees are presented net of Long-term debt, less the current portion on the Consolidated Balance Sheets and are amortized to Interest expense, net on the Consolidated Statements of Income through maturity. 


8.  Financial Instruments and Fair Value Measurements

In the normal course of business, the Company is exposed to certain risks arising from business operations and economic factors.  The Company may use derivative financial instruments to help manage market risk and reduce the exposure to fluctuations in interest rates and foreign currencies.  These financial instruments are not used for trading or other speculative purposes.

Cross-Currency Swaps

The Company is party to certain cross-currency swaps to hedge a portion of our foreign currency risk.  During the quarter, the Company repriced and extended all of its existing cross-currency swaps, which now mature June 2026 (€1,625 million and £700 million).  In addition to cross-currency swaps, we hedge a portion of our foreign currency risk by designating foreign currency denominated long-term debt as net investment hedges of certain foreign operations.  As of June 29, 2024, we had outstanding long-term debt of €379 million that was designated as a hedge of our net investment in certain euro-denominated foreign subsidiaries.  When valuing cross-currency swaps the Company utilizes Level 2 inputs (substantially observable).

Interest Rate Swaps

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).
10
Index
During fiscal 2024, the Company received net proceeds of $27 million related to the settlement of existing interest rate swaps.  The offset is included in Accumulated other comprehensive loss and is being amortized to Interest expense through the term of the original swaps.  Following the transactions, the Company entered into a $450 million interest rate swap transaction, a $500 million interest rate swap transaction and extended an existing $400 million agreement all with expirations in June 2029.

As of June 29, 2024, the Company effectively had (i) a $400 million interest rate swap transaction that swaps a one-month variable SOFR contract for a fixed annual rate of 4.008%, with an expiration in June 2029 (ii) a $450 million interest rate swap transaction that swaps a one-month variable SOFR contract for a fixed annual rate of 4.553%, with an expiration in June 2029, and (iii) a $500 million interest rate swap transaction that swaps a one-month variable SOFR contract for a fixed annual rate of 4.648%, with an expiration in June 2029.

The Company records the fair value positions of all derivative financial instruments on a net basis by counterparty for which a master netting arrangement is utilized. Balances on a gross basis are as follows:

Derivative Instruments
Hedge Designation
Balance Sheet Location
  
June 29, 2024
    
September 30, 2023
  
Cross-currency swaps
Designated
Other current liabilities
    
—
      
66
  
Cross-currency swaps
Designated
Other long-term liabilities
    
165
      
19
  
Interest rate swaps
Designated
Other long-term assets
    
—
      
36
  
Interest rate swaps
Designated
Other long-term liabilities
    
26
      
—
  
Interest rate swaps
Not designated
Other long-term assets
    
5
      
8
  
Interest rate swaps
Not designated
Other long-term liabilities
    
75
      
104
  

The effect of the Company’s derivative instruments on the Consolidated Statements of Income is as follows:

   
Quarterly Period Ended
    
Three Quarterly Periods Ended
  
Derivative Instruments
 Statements of Income Location
  
June 29, 2024
    
July 1, 2023
    
June 29, 2024
    
July 1, 2023
  
Cross-currency swaps
Interest expense
  
$
(8
)
  
$
(10
)
  
$
(28
)
  
$
(31
)
Interest rate swaps
Interest expense
    
(20
)
    
(21
)
    
(62
)
    
(38
)

Non-recurring Fair Value Measurements

The Company has certain assets that are measured at fair value on a non-recurring basis when impairment indicators are present or when the Company completes an acquisition.  The Company adjusts certain long-lived assets to fair value only when the carrying values exceed the fair values.  The categorization of the framework used to value the assets is considered Level 3, due to the subjective nature of the unobservable inputs used to determine the fair value.  These assets that are subject to our annual impairment analysis primarily include our definite lived and indefinite lived intangible assets, including Goodwill and our property, plant and equipment.  The Company reviews Goodwill and other indefinite lived assets for impairment as of the first day of the fourth fiscal quarter each year and more frequently if impairment indicators exist.  The Company determined Goodwill and other indefinite lived assets were not impaired in our annual fiscal 2023 assessment.  No impairment indicators were identified in the current quarter.

Included in the following table are the major categories of assets measured at fair value on a non-recurring basis as of June 29, 2024 and September 30, 2023, along with the impairment loss recognized on the fair value measurement during the period:

 
As of June 29, 2024
  
   
Level 1
    
Level 2
    
Level 3
    
Total
    
Impairment
  
Indefinite-lived trademarks
  
$
—
    
$
—
    
$
248
    
$
248
    
$
—
  
Goodwill
    
—
      
—
      
5,019
      
5,019
      
—
  
Definite lived intangible assets
    
—
      
—
      
1,291
      
1,291
      
—
  
Property, plant, and equipment
    
—
      
—
      
4,558
      
4,558
      
8
  
Total
  
$
—
    
$
—
    
$
11,116
    
$
11,116
    
$
8
  

 
As of September 30, 2023
  
   
Level 1
    
Level 2
    
Level 3
    
Total
    
Impairment
  
Indefinite-lived trademarks
  
$
—
    
$
—
    
$
248
    
$
248
    
$
—
  
Goodwill
    
—
      
—
      
4,981
      
4,981
      
—
  
Definite lived intangible assets
    
—
      
—
      
1,455
      
1,455
      
—
  
Property, plant, and equipment
    
—
      
—
      
4,576
      
4,576
      
8
  
Total
  
$
—
    
$
—
    
$
11,260
    
$
11,260
    
$
8
  

11
Index
The Company’s financial instruments consist primarily of cash and cash equivalents, long-term debt, interest rate and cross-currency swap agreements, and finance lease obligations.  The book value of our marketable long-term indebtedness exceeded fair value by $215 million as of June 29, 2024.  The Company’s long-term debt fair values were determined using Level 2 inputs (substantially observable). 

9.  Income Taxes

On a year-to-date comparison to the statutory rate, the lower effective tax rate was positively impacted by foreign rate differential and other discrete items.

10.  Segment and Geographic Data

The Company’s operations are organized into four reporting segments: Consumer Packaging International, Consumer Packaging North America, Health, Hygiene & Specialties, and Flexibles.  The structure is designed to align us with our customers, provide improved service, drive future growth, and to facilitate synergies realization.

Selected information by reportable segment is presented in the following tables:

 
Quarterly Period Ended
    
Three Quarterly Periods Ended
  
   
June 29, 2024
    
July 1, 2023
    
June 29, 2024
    
July 1, 2023
  
Net sales:
                        
Consumer Packaging International
  
$
959
    
$
1,036
    
$
2,844
    
$
3,031
  
Consumer Packaging North America
    
831
      
798
      
2,281
      
2,335
  
Health, Hygiene & Specialties
    
647
      
657
      
1,896
      
1,997
  
Flexibles
    
724
      
738
      
2,069
      
2,214
  
Total net sales
  
$
3,161
    
$
3,229
    
$
9,090
    
$
9,577
  
Operating income:
                                
Consumer Packaging International
  
$
79
    
$
68
    
$
113
    
$
190
  
Consumer Packaging North America
    
103
      
89
      
243
      
253
  
Health, Hygiene & Specialties
    
34
      
22
      
64
      
89
  
Flexibles
    
87
      
88
      
248
      
246
  
Total operating income
  
$
303
    
$
267
    
$
668
    
$
778
  
Depreciation and amortization:
                                
Consumer Packaging International
  
$
79
    
$
79
    
$
240
    
$
230
  
Consumer Packaging North America
    
57
      
54
      
170
      
159
  
Health, Hygiene & Specialties
    
45
      
45
      
137
      
133
  
Flexibles
    
32
      
29
      
93
      
84
  
 Total depreciation and amortization
  
$
213
    
$
207
    
$
640
    
$
606
  

Selected information by geographical region is presented in the following tables:

 
Quarterly Period Ended
    
Three Quarterly Periods Ended
  
   
June 29, 2024
    
July 1, 2023
    
June 29, 2024
    
July 1, 2023
  
Net sales:
                        
United States and Canada
  
$
1,763
    
$
1,748
    
$
4,996
    
$
5,195
  
Europe
    
1,103
      
1,184
      
3,239
      
3,470
  
Rest of world
    
295
      
297
      
855
      
912
  
Total net sales
  
$
3,161
    
$
3,229
    
$
9,090
    
$
9,577
  

12
Index

11.  Contingencies and Commitments

The Company is party to various legal proceedings involving routine claims which are incidental to its business.  Although the Company’s legal and financial liability with respect to such proceedings cannot be estimated with certainty, we believe that any ultimate liability would not be material to our financial position, results of operations or cash flows.

The Company has various purchase commitments for raw materials, supplies, and property and equipment incidental to the ordinary conduct of business.


12.  Basic and Diluted Earnings Per Share

Basic net income or earnings per share ("EPS") is calculated by dividing the net income attributable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration for common stock equivalents.

Diluted EPS includes the effects of options and restricted stock units, if dilutive.

The following tables provide a reconciliation of the numerator and denominator of the basic and diluted EPS calculations:

 
Quarterly Period Ended
    
Three Quarterly Periods Ended
  
(in millions, except per share amounts)
  
June 29, 2024
    
July 1, 2023
    
June 29, 2024
    
July 1, 2023
  
Numerator
                        
Consolidated net income
  
$
193
    
$
143
    
$
368
    
$
423
  
Denominator
                                
Weighted average common shares outstanding - basic
    
114.5
      
118.7
      
115.2
      
121.0
  
Dilutive shares
    
2.2
      
2.4
      
3.0
      
0.9
  
Weighted average common and common equivalent shares outstanding - diluted
    
116.7
      
121.1
      
118.2
      
121.9
  
                                 
Per common share earnings
                                
Basic
  
$
1.69
    
$
1.20
    
$
3.19
    
$
3.50
  
Diluted
  
$
1.65
    
$
1.18
    
$
3.11
    
$
3.47
  

2.2 million and 2.3 million shares were excluded from the diluted EPS calculation for the quarterly and three quarterly periods ended June 29, 2024 as their effect would be anti-dilutive.  1.2 million and 1.5 million shares were excluded for the quarterly and three quarterly periods ended July 1, 2023. 

13
Index

13.  Accumulated Other Comprehensive Loss

The components and activity of Accumulated other comprehensive loss are as follows:

Quarterly Period Ended
  
Currency
Translation
    
Defined Benefit
Pension and Retiree
Health Benefit Plans
    
Derivative
Instruments
    
Accumulated Other
Comprehensive Loss
  
Balance at March 30, 2024
  
$
(271
)
  
$
(84
)
  
$
29
    
$
(326
)
Other comprehensive income (loss) before reclassifications
    
(63
)
    
—
      
6
      
(57
)
Net amount reclassified
    
—
      
—
      
(12
)
    
(12
)
Balance at June 29, 2024
  
$
(334
)
  
$
(84
)
  
$
23
    
$
(395
)

 
Currency
Translation
    
Defined Benefit
Pension and Retiree
Health Benefit Plans
    
Derivative
Instruments
    
Accumulated Other
Comprehensive Loss
  
Balance at April 1, 2023
  
$
(254
)
  
$
(32
)
  
$
52
    
$
(234
)
Other comprehensive income (loss) before reclassifications
    
23
      
—
      
40
      
63
  
Net amount reclassified
    
—
      
—
      
(9
)
    
(9
)
Balance at July 1, 2023
  
$
(231
)
  
$
(32
)
  
$
83
    
$
(180
)

Three Quarterly Periods Ended
  
Currency
Translation
    
Defined Benefit
Pension and Retiree
Health Benefit Plans
    
Derivative
Instruments
    
Accumulated Other
Comprehensive Loss
  
Balance at September 30, 2023
  
$
(340
)
  
$
(84
)
  
$
88
    
$
(336
)
Other comprehensive income (loss) before reclassifications
    
6
      
—
      
(32
)
    
(26
)
Net amount reclassified
    
—
      
—
      
(33
)
    
(33
)
Balance at June 29, 2024
  
$
(334
)
  
$
(84
)
  
$
23
    
$
(395
)

 
Currency
Translation
    
Defined Benefit
Pension and Retiree
Health Benefit Plans
    
Derivative
Instruments
    
Accumulated Other
Comprehensive Loss
  
Balance at October 1, 2022
  
$
(455
)
  
$
(32
)
  
$
84
    
$
(403
)
Other comprehensive income (loss) before reclassifications
    
224
      
—
      
24
      
248
  
Net amount reclassified
    
—
      
—
      
(25
)
    
(25
)
Balance at July 1, 2023
  
$
(231
)
  
$
(32
)
  
$
83
    
$
(180
)


14
Index
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Summary

Business.  The Company’s operations are organized into four operating segments: Consumer Packaging International, Consumer Packaging North America, Health, Hygiene & Specialties, and Flexibles.  The structure is designed to align us with our customers, provide improved service, drive future growth, and to facilitate synergies realization.  The Consumer Packaging International segment primarily consists of closures and dispensing systems, pharmaceutical devices and packaging, bottles and canisters, and containers.  The Consumer Packaging North America segment primarily consists of containers and pails, foodservice, closures, bottles, prescription vials, and tubes.  The Health, Hygiene & Specialties segment primarily consists of healthcare, hygiene, specialties, and tapes.  The Flexibles segment primarily consists of stretch and shrink films, converter films, institutional can liners, food and consumer films, retail bags, and agriculture films.

Raw Material Trends.  Our primary raw material is polymer resin.  In addition, we use other materials such as colorants, linerboard, and packaging materials in various manufacturing processes.  While temporary industry-wide shortages of raw materials have occurred, we have historically been able to manage the supply chain disruption by working closely with our suppliers and customers.  Changes in the price of raw materials are generally passed on to customers through contractual price mechanisms over time, during contract renewals and other means.

Outlook.  The Company is affected by general economic and industrial growth, raw material availability, cost inflation, supply chain disruptions, and general industrial production.  Our business has both geographic and end market diversity, which reduces the effect of any one of these factors on our overall performance.  Our results are affected by our ability to pass through raw material and other cost changes to our customers, improve manufacturing productivity, and adapt to volume changes of our customers. Despite global macro-economic challenges in the short-term attributed to continued rising inflation and general market softness, we continue to believe our underlying long-term fundamentals in all divisions remain strong. For fiscal 2024, we project cash flow from operations of $1.4 billion and free cash flow of $800 million.  Projected fiscal 2024 free cash flow assumes $600 million of capital spending.  For the calculation of free cash flow and further information related to free cash flow as a non-GAAP financial measure, see “Liquidity and Capital Resources.”

Results of Operations

Comparison of the Quarterly Period Ended June 29, 2024 (the “Quarter”) and the Quarterly Period Ended July 1, 2023 (the “Prior Quarter”)

Business integration expenses consist of restructuring and impairment charges, acquisition and divestiture related costs, and other business optimization costs.  Tables present dollars in millions.

Consolidated Overview
                  
   
Quarter
    
Prior Quarter
    
$ Change
    
% Change
  
Net sales
  
$
3,161
    
$
3,229
    
$
(68
)
    
(2
)%
Cost of goods sold
    
2,560
      
2,649
      
(89
)
    
(3
)%
Other operating expenses
    
298
      
313
      
(15
)
    
(5
)%
Operating income
  
$
303
    
$
267
    
$
36
      
13
%

Net Sales:  The net sales decline is primarily attributed to decreased selling prices of $94 million due to the pass through of lower polymer costs, partially offset by 2% organic volume growth.

Cost of goods sold:  The cost of goods sold decrease is primarily attributed to lower raw material prices, partially offset by increased costs associated with increased volumes.

Other operating expenses:  The other operating expenses decrease is primarily attributed to higher business integration costs in the Prior Quarter from the 2023 cost savings initiative.

Operating Income:  The operating income increase is primarily attributed to a $10 million favorable impact from volume increases, a $10 million favorable impact from price cost spread and a $13 million decline in business integration expenses.

15
Index

Consumer Packaging International
                  
   
Quarter
    
Prior Quarter
    
$ Change
    
% Change
  
Net sales
  
$
959
    
$
1,036
    
$
(77
)
    
(7
)%
Operating income
  
$
79
    
$
68
    
$
11
      
16
%

Net sales:  The net sales decline in the Consumer Packaging International segment is primarily attributed to decreased selling prices of $61 million from lower raw material costs and a $20 million decline from divestures, partially offset by 1% organic volume growth.

Operating income:  The operating income increase is primarily attributed to $3 million impact from price cost spread and a $6 million decline in business integration expenses.

Consumer Packaging North America
                  
   
Quarter
    
Prior Quarter
    
$ Change
    
% Change
  
Net sales
  
$
831
    
$
798
    
$
33
      
4
%
Operating income
  
$
103
    
$
89
    
$
14
      
16
%

Net sales:  The net sales increase in the Consumer Packaging North America segment is primarily attributed to 2% organic volume growth and higher selling prices of $12 million as a result of improved product mix.

Operating income:  The operating income increase is primarily attributed to a $7 million favorable impact from price cost spread and a favorable impact from organic volume growth.

Health, Hygiene & Specialties
                  
   
Quarter
    
Prior Quarter
    
$ Change
    
% Change
  
Net sales
  
$
647
    
$
657
    
$
(10
)
    
(2
)%
Operating income
  
$
34
    
$
22
    
$
12
      
55
%

Net sales:  The net sales decline in the Health, Hygiene & Specialties segment is primarily attributed to decreased selling prices of $17 million, partially offset by 2% organic volume growth.

Operating income:  The operating income increase is primarily attributed to a $7 million decline in business integration expenses and a favorable impact from organic volume growth.

Flexibles
                  
   
Quarter
    
Prior Quarter
    
$ Change
    
% Change
  
Net sales
  
$
724
    
$
738
    
$
(14
)
    
(2
)%
Operating income
  
$
87
    
$
88
    
$
(1
)
    
(1
)%

Net sales:  The net sales decline in the Flexibles segment is primarily attributed to decreased selling prices of $28 million, partially offset by 2% organic volume growth.

Operating income:  The operating income decrease is primarily attributed a $3 million increase in depreciation and amortization, partially offset by the favorable impact from organic volume growth.

Changes in Comprehensive Income

The $73 million decline in comprehensive income from the Prior Quarter is primarily attributed to a $86 million unfavorable change in currency translation and a $37 million unfavorable change in the fair value of derivative instruments, net of tax, partially offset by a $50 million improvement in net income.  Currency translation changes are primarily related to non-U.S. subsidiaries with a functional currency other than the U.S. dollar whereby assets and liabilities are translated from the respective functional currency into U.S. dollars using period-end exchange rates.  The change in currency translation in the Quarter was primarily attributed to locations utilizing the Euro and British pound sterling as their functional currency.  As part of the overall risk management, the Company uses derivative instruments to (i) reduce our exposure to changes in interest rates attributed to the Company’s borrowings and (ii) reduce foreign currency exposure to translation of certain foreign operations.  The Company records changes to the fair value of these instruments in Accumulated other comprehensive loss.  The change in fair value of these instruments in fiscal 2024 versus fiscal 2023 is primarily attributed to the change in the forward interest and foreign exchange curves between measurement dates.

16
Index

Comparison of the Three Quarterly Periods Ended June 29, 2024 (the “YTD”) and the Three Quarterly Periods Ended July 1, 2023 (the “Prior YTD”)

Business integration expenses consist of restructuring and impairment charges, acquisition and divestiture related costs, and other business optimization costs.  Tables present dollars in millions.

Consolidated Overview
                  
   
YTD
    
Prior YTD
    
$ Change
    
% Change
  
Net sales
  
$
9,090
    
$
9,577
    
$
(487
)
    
(5
)%
Cost of goods sold
    
7,448
      
7,873
      
(425
)
    
(5
)%
Other operating expenses
    
974
      
926
      
48
      
5
%
Operating income
  
$
668
    
$
778
    
$
(110
)
    
(14
)%

Net Sales: The net sales decline is primarily attributed to decreased selling prices of $436 million due to the pass through of lower polymer costs and a 1% volume decline partially offset by a $79 million favorable impact from foreign currency changes.

Cost of goods sold: The cost of goods sold decrease is primarily attributed to lower raw material prices and the volume decline, partially offset by foreign currency changes.

Other operating expenses: The other operating expenses increase is primarily attributed to a $57 million loss from divestitures and costs associated with the announced spin-off and merger of our HHNF business with GLT.

Operating Income: The operating income decrease is primarily attributed to a $21 million unfavorable impact from the volume decline, a $57 million loss from divestitures, a $34 million increase in depreciation and amortization expense, a $17 million unfavorable impact from price cost spread and a $12 million unfavorable impact from hyperinflation in our Argentinian subsidiary, partially offset by a $13 million favorable impact from foreign currency changes.
 
Consumer Packaging International
                  
   
YTD
    
Prior YTD
    
$ Change
    
% Change
  
Net sales
  
$
2,844
    
$
3,031
    
$
(187
)
    
(6
)%
Operating income
  
$
113
    
$
190
    
$
(77
)
    
(41
)%

Net sales:  The net sales decline in the Consumer Packaging International segment is primarily attributed to decreased selling prices of $167 million, a 1% volume decline and a $40 million decline from divestures in the YTD partially offset by a $49 million favorable impact from foreign currency changes.

Operating income:  The operating income decrease is primarily attributed to a $9 million decline from divestitures in the YTD, including a $57 million loss from those divestitures, a $10 million increase in depreciation and amortization expense, and an $8 million unfavorable impact from price cost spread, partially offset by a $7 million favorable impact from foreign currency changes.

Consumer Packaging North America
                  
   
YTD
    
Prior YTD
    
$ Change
    
% Change
  
Net sales
  
$
2,281
    
$
2,335
    
$
(54
)
    
(2
)%
Operating income
  
$
243
    
$
253
    
$
(10
)
    
(4
)%

Net sales:  The net sales decline in the Consumer Packaging North America segment is primarily attributed to decreased selling prices of $45 million and a 2% volume decline due to general market softness, partially offset by acquisition sales of $28 million.

Operating income:  The operating income decrease is primarily attributed to an $8 million unfavorable impact from the volume decline and a $10 million increase in depreciation and amortization expense, partially offset by earnings from the acquisition of F&S Tool.

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Index

Health, Hygiene & Specialties
                  
   
YTD
    
Prior YTD
    
$ Change
    
% Change
  
Net sales
  
$
1,896
    
$
1,997
    
$
(101
)
    
(5
)%
Operating income
  
$
64
    
$
89
    
$
(25
)
    
(28
)%

Net sales:  The net sales decline in the Health, Hygiene & Specialties segment is primarily attributed to decreased selling prices of $106 million and a 1% volume decline, partially offset by a $19 million favorable impact from foreign currency changes.

Operating income:  The operating income decrease is primarily attributed to a $16 million unfavorable impact from price cost spread and a $12 million unfavorable impact from hyperinflation in our Argentinian subsidiary.

Flexibles
                  
   
YTD
    
Prior YTD
    
$ Change
    
% Change
  
Net sales
  
$
2,069
    
$
2,214
    
$
(145
)
    
(7
)%
Operating income
  
$
248
    
$
246
    
$
2
      
1
%

Net sales:  The net sales decline in the Flexibles segment is primarily attributed to decreased selling prices of $118 million and a 2% volume decline, partially offset by an $11 million favorable impact from foreign currency changes.

Operating income:  The operating income increase is primarily attributed to a $13 million favorable impact from price cost spread partially offset by a $9 million increase in depreciation and amortization expense.

Changes in Comprehensive Income

The $337 million decline in comprehensive income from the Prior YTD was primarily attributed to a $218 million unfavorable change in currency translation, a $64 million unfavorable change in the fair value of derivative instruments, net of tax, and a $55 million decline in net income.  Currency translation changes are primarily related to non-U.S. subsidiaries with a functional currency other than the U.S. dollar whereby assets and liabilities are translated from the respective functional currency into U.S. dollars using period-end exchange rates.  The change in currency translation in the YTD was primarily attributed to locations utilizing the Euro and British pound sterling as their functional currency.  As part of the overall risk management, the Company uses derivative instruments to (i) reduce our exposure to changes in interest rates attributed to the Company’s borrowings and (ii) reduce foreign currency exposure to translation of certain foreign operations.  The Company records changes to the fair value of these instruments in Accumulated other comprehensive loss.  The change in fair value of these instruments in fiscal 2024 versus fiscal 2023 is primarily attributed to the change in the forward interest and foreign exchange curves between measurement dates.

Liquidity and Capital Resources
Senior Secured Credit Facility

We manage our global cash requirements considering (i) available funds among the many subsidiaries through which we conduct business, (ii) the geographic location of our liquidity needs, and (iii) the cost to access international cash balances.  At the end of the Quarter, the Company had no outstanding balance on its $1,000 million asset-based revolving line of credit that matures in June 2028. The Company was in compliance with all covenants at the end of the Quarter.

Cash Flows

Net cash from operating activities decreased $193 million from the Prior YTD primarily attributed to higher working capital partially offset by a decline in net income prior to non-cash activities.

Net cash from investing activities decreased $154 million from the Prior YTD primarily attributed to the proceeds from business divestitures in the YTD and a decrease in capital spend.

Net cash from financing activities decreased $165 million from the Prior YTD primarily attributed to lower share repurchases partially offset by higher repayments of long-term debt in the YTD.

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Index

Dividend Payments

The Company declared and paid a cash dividend of $0.275 per share during each of the first three quarters of fiscal 2024.

Share Repurchases

YTD fiscal 2024, the Company repurchased approximately 2.0 million shares for $117 million.  Authorized share repurchases of $324 million remain available to the Company.

Free Cash Flow

Our consolidated free cash flow for the YTD and Prior YTD are summarized as follows:

 
June 29, 2024
    
July 1, 2023
  
Cash flow from operating activities
  
$
297
    
$
490
  
Additions to property, plant and equipment, net
    
(473
)
    
(560
)
Free cash flow
  
$
(176
)
  
$
(70
)

We use free cash flow as a supplemental measure of liquidity as it assists us in assessing our ability to fund growth through generation of cash.  Free cash flow may be calculated differently by other companies, including other companies in our industry or peer group, limiting its usefulness on a comparative basis.  Free cash flow is not a financial measure presented in accordance with generally accepted accounting principles ("GAAP") and should not be considered as an alternative to any other measure determined in accordance with GAAP.

Liquidity Outlook

At June 29, 2024, our cash balance was $509 million, which was primarily located outside the U.S.  We believe our existing U.S. based cash and cash flow from U.S. operations, together with available borrowings under our senior secured credit facilities, will be adequate to meet our short-term and long-term liquidity needs with the exception of funds needed to cover all long-term debt obligations, which we intend to refinance prior to maturity.  The Company has the ability to repatriate the cash located outside the U.S. to the extent not needed to meet operational and capital needs without significant restrictions.

Summarized Guarantor Financial Information

Berry Global, Inc. (“Issuer”) has notes outstanding which are fully, jointly, severally, and unconditionally guaranteed by its parent, Berry Global Group, Inc. (for purposes of this section, “Parent”) and substantially all of Issuer’s domestic subsidiaries. Separate narrative information or financial statements of the guarantor subsidiaries have not been included because they are 100% owned by Parent and the guarantor subsidiaries unconditionally guarantee such debt on a joint and several basis. A guarantee of a guarantor subsidiary of the securities will terminate upon the following customary circumstances: the sale of the capital stock of such guarantor if such sale complies with the indentures, the designation of such guarantor as an unrestricted subsidiary, the defeasance or discharge of the indenture or in the case of a restricted subsidiary that is required to guarantee after the relevant issuance date, if such guarantor no longer guarantees certain other indebtedness of Issuer. The guarantees of the guarantor subsidiaries are also limited as necessary to prevent them from constituting a fraudulent conveyance under applicable law and any guarantees guaranteeing subordinated debt are subordinated to certain other of the Company’s debts. Parent also guarantees Issuer’s term loans and revolving credit facilities. The guarantor subsidiaries guarantee our term loans and are co-borrowers under our revolving credit facility.

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Index

Presented below is summarized financial information for the Parent, Issuer and guarantor subsidiaries on a combined basis, after intercompany transactions have been eliminated.

   
Three Quarterly Periods Ended
  
   
June 29, 2024
  
Net sales
  
$
4,815
  
Gross profit
    
981
  
Earnings from continuing operations
    
359
  
Net income
  
$
359
  

Includes $6 million of income associated with intercompany activity with non-guarantor subsidiaries.

   
June 29, 2024
    
September 30, 2023
  
Assets
            
Current assets
  
$
1,485
    
$
1,975
  
Noncurrent assets
    
5,903
      
5,997
  
                 
Liabilities
                
Current liabilities
  
$
1,010
    
$
1,363
  
Intercompany payable
    
799
      
754
  
Noncurrent liabilities
    
9,970
      
10,271
  

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 and accounts receivable supply chain finance factoring programs.  Our senior secured credit facilities are comprised of (i) $2.0 billion term loans and (ii) a $1.0 billion revolving credit facility with no borrowings outstanding.  Borrowings under our senior secured credit facilities bear interest at a rate equal to an applicable margin plus SOFR.  The applicable margin for SOFR rate borrowings under the revolving credit facility ranges from 1.25% to 1.50%, and the margin for the term loans is 1.75% per annum.  As of period end, the SOFR rate of approximately 5.33% was applicable to the term loans.  A change of 0.25% on these floating interest rate exposures would increase our annual interest expense by approximately $3 million.

We seek to minimize interest rate volatility risk through regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments.  These financial instruments are not used for trading or other speculative purposes. (See Note 8.)

Foreign Currency Risk

As a global company, we face foreign currency risk exposure from fluctuating currency exchange rates, primarily the U.S. dollar against the euro, British pound sterling, Brazilian real, Chinese renminbi, Canadian dollar and Mexican peso.  Significant fluctuations in currency rates can have a substantial impact, either positive or negative, on our revenue, cost of sales, and operating expenses.   Currency translation gains and losses are primarily related to non-U.S. subsidiaries with a functional currency other than U.S. dollars whereby assets and liabilities are translated from the respective functional currency into U.S. dollars using period-end exchange rates and impact our Comprehensive income.  A 10% decline in foreign currency exchange rates would have had a $9 million unfavorable impact on our Net income for the three quarterly periods ended June 29, 2024. (See Note 8.)

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 “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.
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Index

The Company’s management, with the participation of the Chief Executive Officer and the Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the disclosure controls and procedures as of the end of the period covered by this report.  Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the design and operation of our disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period covered by this report.

(b) Changes in internal control over financial reporting.

There were no changes in our internal control over financial reporting that occurred during the Quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II.  Other Information

Item 1.  Legal Proceedings

There have been no material changes in legal proceedings from the items disclosed in our most recent Form 10-K filed with the Securities and Exchange Commission.

Item 1A.  Risk Factors

Before investing in our securities, we recommend that investors carefully consider the risks described in our most recent Form 10-K and subsequent periodic reports filed with the Securities and Exchange Commission, including those under the heading “Risk Factors” and other information contained in this Quarterly Report.  Realization of any of these risks could have a material adverse effect on our business, financial condition, cash flows and results of operations.

Additionally, we caution readers that the list of risk factors discussed in our most recent Form 10-K and subsequent periodic reports may not contain all of the material factors that are important to you.  In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this report may not in fact occur.  Accordingly, readers should not place undue reliance on those statements.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Repurchases of Equity Securities

The following table summarizes the Company's repurchases of its common stock during the Quarterly Period ended June 29, 2024.

Fiscal Period
  
Total Number of
Shares Purchased
    
Average Price
Paid Per Share
    
Total Number of Shares
Purchased as Part of Publicly
Announced Programs
    
Dollar Value of Shares that
May Yet be Purchased Under
the Program (in millions) (a)
  
April
    
390,402
    
$
58.87
      
390,402
    
$
331
  
May
    
22,500
      
58.40
      
22,500
      
329
  
June
    
80,148
      
58.99
      
80,148
      
324
  
  Total
    
493,050
    
$
58.87
      
493,050
    
$
324
  

(a)
All open market purchases during the quarter were made under the 2023 authorization from our board of directors.

Item 5.  Other Information

Rule 10b5-1 Plan Elections

During the third quarter of fiscal 2024, none of our directors or officers informed us of the adoption or termination of a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as those terms are defined in Regulation S-K, Item 408, except as follows;

On May 28, 2024, Director Evan Bayh adopted a new 10b5-1 trading arrangement providing for the sale from time to time of up to 14,000 shares of the Company's common stock issuable upon exercise of vested options between August 28, 2024 and November 28, 2024. The trading arrangement is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act.

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Index

Item 6.  Exhibits

Exhibit No.
  
Description of Exhibit
 
Indenture, dated May 28, 2024, among Berry Global, Inc., certain guarantors party thereto, U.S. Bank Trust Company, National Association, as Trustee and Collateral Agent, relating to the 5.800% First Priority Senior Secured Notes due 2031 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on May 28, 2024).
 
Registration Rights Agreement, dated May 28, 2024, by and among Berry Global, Inc., Berry Global Group, Inc., each subsidiary of Berry Global, Inc. identified therein, and Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC and Wells Fargo Securities, LLC, on behalf of themselves and as representatives of the initial purchasers, relating to the 5.800% First Priority Senior Secured Notes due 2031 (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on May 28, 2024).
 
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).

*
Filed herewith
**
Furnished herewith

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Index

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
Berry Global Group, Inc.
  
       
August 2, 2024
By:
/s/ Mark W. Miles
  
   
Mark W. Miles
  
   
Chief Financial Officer
  

23