SEC Info - Berry Global Group, Inc. - ‘10-Q’ for 7/2/22

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Berry Global Group, Inc. – ‘10-Q’ for 7/2/22

On: Thursday, 8/4/22, at 4:23pm ET · For: 7/2/22 · Accession #: 1140361-22-28207 · File #: 1-35672

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 8/04/22  Berry Global Group, Inc.          10-Q        7/02/22   62:5.8M                                   Broadridge Fin’l So… Inc

Quarterly Report — Form 10-Q

Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Berry Global Group 10Q                              HTML   1.19M 
 2: EX-22.1     Exh 22.1 Subsidiary Guarantors                      HTML    252K 
 3: EX-31.1     Exh 31.1 Rule 13A-14(A)/15D-14(A) Certification of  HTML     25K 
                the Chief Executive Officer                                      
 4: EX-31.2     Exh 31.2 Rule 13A-14(A)/15D-14(A) Certification of  HTML     25K 
                the Chief Financial Officer                                      
 5: EX-32.1     Exh 32.1 Section 1350 Certification of the Chief    HTML     19K 
                Executive Officer                                                
 6: EX-32.2     Exh 32.2 Section 1350 Certification of the Chief    HTML     19K 
                Financial Officer                                                
12: R1          Document and Entity Information                     HTML     71K 
13: R2          Consolidated Statements of Income                   HTML     78K 
14: R3          Consolidated Statements of Comprehensive Income     HTML     45K 
15: R4          Consolidated Balance Sheets                         HTML    129K 
16: R5          Consolidated Balance Sheets (Parenthetical)         HTML     20K 
17: R6          Consolidated Statements of Cash Flows               HTML     91K 
18: R7          Consolidated Statements of Changes in               HTML     64K 
                Stockholders' Equity                                             
19: R8          Basis of Presentation                               HTML     22K 
20: R9          Recent Accounting Pronouncements                    HTML     31K 
21: R10         Revenue and Accounts Receivable                     HTML     34K 
22: R11         Disposition                                         HTML     21K 
23: R12         Restructuring and Transaction Activities            HTML     50K 
24: R13         Leases                                              HTML     43K 
25: R14         Long-Term Debt                                      HTML     47K 
26: R15         Financial Instruments and Fair Value Measurements   HTML     84K 
27: R16         Income Taxes                                        HTML     23K 
28: R17         Segment and Geographic Data                         HTML     81K 
29: R18         Contingencies and Commitments                       HTML     21K 
30: R19         Share Repurchase Program                            HTML     24K 
31: R20         Basic and Diluted Earnings Per Share                HTML     46K 
32: R21         Accumulated Other Comprehensive Loss                HTML     74K 
33: R22         Basis of Presentation (Policies)                    HTML     29K 
34: R23         Recent Accounting Pronouncements (Policies)         HTML     21K 
35: R24         Restructuring and Transaction Activities (Tables)   HTML     52K 
36: R25         Leases (Tables)                                     HTML     44K 
37: R26         Long-Term Debt (Tables)                             HTML     46K 
38: R27         Financial Instruments and Fair Value Measurements   HTML     82K 
                (Tables)                                                         
39: R28         Segment and Geographic Data (Tables)                HTML     81K 
40: R29         Basic and Diluted Earnings Per Share (Tables)       HTML     44K 
41: R30         Accumulated Other Comprehensive Loss (Tables)       HTML     73K 
42: R31         Revenue and Accounts Receivable (Details)           HTML     23K 
43: R32         Disposition (Details)                               HTML     29K 
44: R33         Restructuring and Transaction Activities,           HTML     30K 
                Restructuring Charges by Segment (Details)                       
45: R34         Restructuring and Transaction Activities,           HTML     34K 
                Restructuring Accrual Activity (Details)                         
46: R35         Leases (Details)                                    HTML     61K 
47: R36         Long-Term Debt (Details)                            HTML     68K 
48: R37         Financial Instruments and Fair Value Measurements,  HTML     34K 
                Cross-Currency Swaps (Details)                                   
49: R38         Financial Instruments and Fair Value Measurements,  HTML     41K 
                Interest Rate Swaps (Details)                                    
50: R39         Financial Instruments and Fair Value Measurements,  HTML     33K 
                Fair Value of Derivative and Location on                         
                Consolidated Balance Sheets (Details)                            
51: R40         Financial Instruments and Fair Value Measurements,  HTML     25K 
                Effect of Derivatives on Consolidated Statements                 
                of Income (Details)                                              
52: R41         Financial Instruments and Fair Value Measurements,  HTML     59K 
                Assets Measured at Fair Value on Non-Recurring                   
                Basis (Details)                                                  
53: R42         Segment and Geographic Data, Selected Information   HTML     47K 
                by Reportable Segment (Details)                                  
54: R43         Segment and Geographic Data, Selected Information   HTML     32K 
                by Geographical Region (Details)                                 
55: R44         Share Repurchase Program (Details)                  HTML     28K 
56: R45         Basic and Diluted Earnings Per Share (Details)      HTML     58K 
57: R46         Accumulated Other Comprehensive Loss (Details)      HTML     41K 
60: XML         IDEA XML File -- Filing Summary                      XML    106K 
58: XML         XBRL Instance -- form10q_htm                         XML   1.46M 
59: EXCEL       IDEA Workbook of Financial Reports                  XLSX     82K 
 8: EX-101.CAL  XBRL Calculations -- bery-20220702_cal               XML    130K 
 9: EX-101.DEF  XBRL Definitions -- bery-20220702_def                XML    336K 
10: EX-101.LAB  XBRL Labels -- bery-20220702_lab                     XML   1.15M 
11: EX-101.PRE  XBRL Presentations -- bery-20220702_pre              XML    622K 
 7: EX-101.SCH  XBRL Schema -- bery-20220702                         XSD    101K 
61: JSON        XBRL Instance as JSON Data -- MetaLinks              284±   414K 
62: ZIP         XBRL Zipped Folder -- 0001140361-22-028207-xbrl      Zip    235K

‘10-Q’ — Berry Global Group 10Q

Document Table of Contents

Page	(sequential)	(alphabetic)	↑Top
		Alternative Formats (Word, et al.) Consolidated Balance Sheets Consolidated Statements of Cash Flows Consolidated Statements of Changes in Stockholders' Equity Consolidated Statements of Income and Comprehensive Income Controls and Procedures Exhibits Index Legal Proceedings Management's Discussion and Analysis of Financial Condition and Results of Operations Notes to Consolidated Financial Statements Quantitative and Qualitative Disclosures about Market Risk Risk Factors Signature Unregistered Sales of Equity Securities and Use of Proceeds
1	1st Page – Filing Submission
"	Index
"	Consolidated Statements of Income and Comprehensive Income
"	Consolidated Balance Sheets
"	Consolidated Statements of Cash Flows
"	Consolidated Statements of Changes in Stockholders' Equity
"	Notes to Consolidated Financial Statements
"	Management's Discussion and Analysis of Financial Condition and Results of Operations
"	Quantitative and Qualitative Disclosures about Market Risk
"	Controls and Procedures
"	Legal Proceedings
"	Risk Factors
"	Unregistered Sales of Equity Securities and Use of Proceeds
"	Exhibits
"	Signature

This is an HTML Document rendered as filed. [ Alternative Formats ]

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM i 10-Q

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

For the quarterly period ended i July 2, 2022

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

For the transition period from __________ to __________

Commission File Number i 001-35672

i BERRY GLOBAL GROUP, INC.

A i Delaware corporation

i 101 Oakley Street, i Evansville, i Indiana, i 47710

( i 812) i 424-2904

IRS employer identification number

i 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
i Common Stock, $0.01 par value per share	i BERY	i 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. i 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). i 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.

i Large Accelerated Filer ☒

Accelerated Filer ☐

Non-Accelerated Filer ☐

Smaller Reporting Company i ☐

Emerging Growth Company i ☐

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 i ☐ No ☒

There were i 125.1 million shares of common stock outstanding at August 4, 2022.

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” 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.

Berry Global Group, Inc.

Form 10-Q Index

For Quarterly Period Ended July 2, 2022

Part I.	Financial Information		Page No.
	Item 1.	Financial Statements:
		Consolidated Statements of Income and Comprehensive Income	4
		Consolidated Balance Sheets	5
		Consolidated Statements of Cash Flows	6
		Consolidated Statements of Changes in Stockholders’ Equity	7
		Notes to Consolidated Financial Statements	8
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	21
	Item 4.	Controls and Procedures	21
Part II.	Other Information
	Item 1.	Legal Proceedings	22
	Item 1A.	Risk Factors	22
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22
	Item 6.	Exhibits	23
	Signature		24

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

Net sales

i 3,726

i 3,675

i 11,074

i 10,181

Costs and expenses:

Cost of goods sold

i 3,105

i 3,049

i 9,297

i 8,273

Selling, general and administrative

i 215

i 207

i 657

i 668

Amortization of intangibles

i 63

i 72

i 196

i 219

Restructuring and transaction activities

i 7

i 4

i 18

i 41

Operating income

i 336

i 343

i 906

i 980

Other expense

i 7

i 14

i 13

i 45

Interest expense

i 70

i 76

i 212

i 257

Income before income taxes

i 259

i 253

i 681

i 678

Income tax expense

i 52

i 59

i 148

i 173

Net income

i 207

i 194

i 533

i 505

Net income per share:

Basic

i 1.61

i 1.44

i 4.02

i 3.76

Diluted

i 1.58

i 1.40

i 3.93

i 3.67

Consolidated Statements of Comprehensive Income

(Unaudited)

(in millions of dollars)

Quarterly Period Ended

Three Quarterly Periods Ended

Net income

i 207

i 194

i 533

i 505

Other comprehensive income, net of tax:

Currency translation

( i 159

)

i 91

( i 144

)

i 196

Derivative instruments

i 19

( i 2

)

i 119

i 69

Other comprehensive (loss) income

( i 140

)

i 89

( i 25

)

i 265

Comprehensive income

i 67

i 283

i 508

i 770

See notes to consolidated financial statements.

Index

Be rry Global Group, Inc.

Consolidated Balance Sheets

(in millions of dollars)

	July 2, 2022			October 2, 2021
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	i 527		$	i 1,091
Accounts receivable		i 1,974			i 1,879
Finished goods		i 1,027			i 960
Raw materials and supplies		i 951			i 947
Prepaid expenses and other current assets		i 237			i 217
Total current assets		i 4,716			i 5,094
Noncurrent assets:
Property, plant and equipment		i 4,560			i 4,677
Goodwill and intangible assets		i 6,942			i 7,434
Right-of-use assets		i 522			i 562
Other assets		i 145			i 115
Total assets	$	i 16,885		$	i 17,882


Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	i 1,518		$	i 2,041
Accrued employee costs		i 260			i 336
Other current liabilities		i 837			i 788
Current portion of long-term debt		i 15			i 21
Total current liabilities		i 2,630			i 3,186
Noncurrent liabilities:
Long-term debt		i 9,488			i 9,439
Deferred income taxes		i 606			i 568
Employee benefit obligations		i 223			i 276
Operating lease liabilities		i 432			i 466
Other long-term liabilities		i 397			i 767
Total liabilities		i 13,776			i 14,702

Stockholders’ equity:
Common stock ( i 125.4 and i 135.5 million shares issued, respectively)		i 1			i 1
Additional paid-in capital		i 1,171			i 1,134
Retained earnings		i 2,258			i 2,341
Accumulated other comprehensive loss		( i 321	)		( i 296	)
Total stockholders’ equity		i 3,109			i 3,180
Total liabilities and stockholders’ equity	$	i 16,885		$	i 17,882

See notes to consolidated financial statements.

Index

Berr y Global Group, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

(in millions of dollars)

	Three Quarterly Periods Ended
	July 2, 2022			July 3, 2021
Cash Flows from Operating Activities:
Net income	$	i 533		$	i 505
Adjustments to reconcile net cash from operating activities:
Depreciation		i 424			i 420
Amortization of intangibles		i 196			i 219
Non-cash interest expense		i 11			i 26
Deferred income tax		( i 66	)		( i 53	)
Share-based compensation expense		i 34			i 34
Other non-cash operating activities, net		( i 2	)		i 60
Settlement of derivatives		i 69			i —
Changes in working capital		( i 800	)		( i 278	)
Changes in other assets and liabilities		( i 54	)		( i 21	)
Net cash from operating activities		i 345			i 912

Cash Flows from Investing Activities:
Additions to property, plant and equipment, net		( i 556	)		( i 520	)
Divestiture of businesses		i 125			i 165
Other investing activities		i 6			i —
Net cash from investing activities		( i 425	)		( i 355	)

Cash Flows from Financing Activities:
Proceeds from long-term borrowings		i 170			i 2,716
Repayments on long-term borrowings		( i 16	)		( i 3,287	)
Proceeds from issuance of common stock		i 24			i 57
Repurchase of common stock		( i 637	)		i —
Debt financing costs		i —			( i 20	)
Net cash from financing activities		( i 459	)		( i 534	)
Effect of currency translation on cash		( i 25	)		i 31
Net change in cash and cash equivalents		( i 564	)		i 54
Cash and cash equivalents at beginning of period		i 1,091			i 750
Cash and cash equivalents at end of period	$	i 527		$	i 804

See notes to consolidated financial statements.

Index

Be rry 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 April 2, 2022

i 1

i 1,174

( i 181

)

i 2,326

i 3,320

Net income

i —

i 207

Other comprehensive income

i —

( i 140

)

i —

( i 140

)

Share-based compensation

i —

i 6

i —

i 6

Proceeds from issuance of common stock

i —

i 2

i —

i 2

Common stock repurchased and retired

i —

( i 11

)

i —

( i 275

)

( i 286

)

Balance at July 2, 2022

i 1

i 1,171

( i 321

)

i 2,258

i 3,109

Balance at April 3, 2021

i 1

i 1,101

( i 375

)

i 1,919

i 2,646

Net income

i —

i 194

Other comprehensive loss

i —

i 89

i —

i 89

Share-based compensation

i —

i 6

i —

i 6

Proceeds from issuance of common stock

i —

i 18

i —

i 18

Balance at July 3, 2021

i 1

i 1,125

( i 286

)

i 2,113

i 2,953

Three Quarterly Periods Ended

Common

Stock

Additional

Paid-in Capital

Accumulated Other

Comprehensive Loss

Retained

Earnings

Total

Balance at October 2, 2021

i 1

i 1,134

( i 296

)

i 2,341

i 3,180

Net income

i —

i 533

Other comprehensive income

i —

( i 25

)

i —

( i 25

)

Share-based compensation

i —

i 34

i —

i 34

Proceeds from issuance of common stock

i —

i 24

i —

i 24

Common stock repurchased and retired

i —

( i 21

)

i —

( i 616

)

( i 637

)

Balance at July 2, 2022

i 1

i 1,171

( i 321

)

i 2,258

i 3,109

Balance at September 26, 2020

i 1

i 1,034

( i 551

)

i 1,608

i 2,092

Net income

i —

i 505

Other comprehensive income

i —

i 265

i —

i 265

Share-based compensation

i —

i 34

i —

i 34

Proceeds from issuance of common stock

i —

i 57

i —

i 57

Balance at July 3, 2021

i 1

i 1,125

( i 286

)

i 2,113

i 2,953

See notes to consolidated financial statements.

Index

Berry Global Group, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

(tables in millions of dollars, except per share data)

1. Basis of Presentation

i The accompanying unaudited Condensed 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 for interim reporting. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. i 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. i The Company’s U.S. based results for fiscal 2022 and fiscal 2021 are based on a fifty-two and fifty-three week period, respectively. The extra week in fiscal 2021 occurred in the first quarter. i The Company has recast certain prior period amounts to conform to current reporting. 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 Securities and Exchange Commission.

2. Recent Accounting Pronouncements

Reference Rate Reform

In 2020, the FASB issued ASU 2020-04, Reference Rate Reform - Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848). This standard provides temporary optional expedients and exceptions to the GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as SOFR. ASU 2020-04 is effective upon issuance and generally can be applied through the end of calendar year 2022. The Company is currently evaluating the impact and does not anticipate a material impact on consolidated financial statements or disclosures.

3. 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 $ i 101 million and $ i 104 million at July 2, 2022 and October 2, 2021, respectively, 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 $ i 19 million and $ i 21 million at July 2, 2022 and October 2, 2021, respectively. 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.

4. Disposition

During fiscal 2022, the Company completed the sale of its rotational molding business, which was operated in the Consumer Packaging International segment for net proceeds of $ i 108 million. In fiscal 2021, the rotational molding business recorded net sales of $ i 146 million.

Index

5. Restructuring and Transaction Activities

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

Quarterly Period Ended

Three Quarterly Periods Ended

Consumer Packaging International

i 3

i 10

i 44

Consumer Packaging North America

i 1

i —

i 4

i 1

Health, Hygiene & Specialties

i 3

i —

i 2

i —

Engineered Materials

i —

i 1

i 2

( i 4

)

Consolidated

i 7

i 4

i 18

i 41

The table below sets forth the activity with respect to the restructuring and transaction activities accrual at July 2, 2022:

Restructuring

Employee Severance

and Benefits

Facility

Exit Costs

Transaction

Activities

Total

Balance as of October 2, 2021

i 6

i 5

i —

i 11

Charges

i 4

i 7

i 18

Cash

( i 6

)

( i 9

)

( i 7

)

( i 22

)

Balance as of July 2, 2022

i 4

i 3

i —

i 7

6. Leases

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

We recognize right-of-use assets and lease liabilities for leases with original lease terms greater than one year based on the present value of lease payments over the lease term using our incremental borrowing rate on a collateralized basis. Short-term leases, with original lease terms of less than one year, are not recognized on the balance sheet. We are party to certain leases, namely for manufacturing facilities, which offer renewal options to extend the original lease term. Renewal options are included in the right-of-use asset and lease liability based on our assessment of the probability that the options will be exercised.

Supplemental lease information is as follows:

Leases	Classification	July 2, 2022		October 2, 2021
Operating leases:
Operating lease right-of-use assets	Right-of-use assets	$	i 522	$	i 562
Current operating lease liabilities	Other current liabilities		i 107		i 113
Noncurrent operating lease liabilities	Operating lease liability		i 432		i 466
Finance leases:
Finance lease right-of-use assets	Property, plant, and equipment, net	$	i 40	$	i 57
Current finance lease liability	Current portion of long-term debt		i 10		i 14
Noncurrent finance lease liabilities	Long-term debt, less current portion		i 27		i 38

Three Quarterly Periods Ended

Lease Type

Cash Flow Classification

Lease Expense Category

July 2, 2022

July 3, 2021

Operating

Lease cost

i 100

i 85

Finance

Operating

Interest expense

i 1

i 2

Finance

Financing

i 14

i 19

Finance

Amortization of right-of-use assets

i 7

i 9

Right-of-use assets obtained in exchange for new operating lease liabilities were $ i 5 million and $ i 26 million for the quarterly and three quarterly periods ended July 2, 2022, respectively.

Index

7. Long-Term Debt

Long-term debt consists of the following:

Facility	Maturity Date	July 2, 2022			October 2, 2021
Term loan	July 2026	$	i 3,440			i 3,440
Revolving line of credit	May 2024		i 170			i —
i 0.95% First Priority Senior Secured Notes	February 2024		i 800			i 800
i 1.00% First Priority Senior Secured Notes ^(a)	July 2025		i 734			i 810
i 1.57% First Priority Senior Secured Notes	January 2026		i 1,525			i 1,525
i 4.875% First Priority Senior Secured Notes	July 2026		i 1,250			i 1,250
i 1.65% First Priority Senior Secured Notes	January 2027		i 400			i 400
i 1.50% First Priority Senior Secured Notes ^(a)	July 2027		i 393			i 434
i 4.50% Second Priority Senior Secured Notes	February 2026		i 300			i 300
i 5.625% Second Priority Senior Secured Notes	July 2027		i 500			i 500
Debt discounts and deferred fees			( i 65	)		( i 77	)
Finance leases and other	Various		i 56			i 78
Total long-term debt			i 9,503			i 9,460
Current portion of long-term debt			( i 15	)		( i 21	)
Long-term debt, less current portion		$	i 9,488			i 9,439

^(a)	Euro denominated

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. The Company settled its € i 250 million swap agreement which matured May 2022 for proceeds of $ i 6 million. As of July 2, 2022, the swap agreements mature June 2024 (€ i 1,625 million) and July 2027 (£ i 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 July 2, 2022, we had outstanding long-term debt of € i 785 million that was designated as a hedge of our net investment in certain euro-denominated foreign subsidiaries. When valuing cross-currency swaps the Company utilizes Level 2 inputs (substantially observable).

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).

During fiscal 2022, the Company elected to cash settle existing interest rate swaps and received net proceeds of $ i 69 million. The offset is included in Accumulated other comprehensive loss and is being amortized to Interest expense through the term of the original swaps. Additionally, the Company entered into $ i 450 million and $ i 400 million interest rate swap transactions that swap a i i one-month / variable LIBOR contract for a fixed annual rate.

As of July 2, 2022, the Company effectively had (i) a $ i 450 million interest rate swap transaction that swaps a i one-month variable LIBOR contract for a fixed annual rate of i 2.765%, with an expiration in June 2026, (ii) a $ i 400 million interest rate swap transaction that swaps a i one-month variable LIBOR contract for a fixed annual rate of i 2.733% with an expiration in June 2026, (iii) a $ i 884 million interest rate swap transaction that swaps a i one-month variable LIBOR contract for a fixed annual rate of i 1.857%, with an expiration in June 2024, and (iv) a $ i 473 million interest rate swap transaction that swaps a i one-month variable LIBOR contract for a fixed annual rate of i 2.050%, with an expiration in June 2024.

Index

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	July 2, 2022		October 2, 2021
Cross-currency swaps	Designated	Other assets	$	i 18	$	i —
Cross-currency swaps	Designated	Other long-term liabilities		i 40		i 323
Interest rate swaps	Designated	Other assets		i 34		i —
Interest rate swaps	Designated	Other long-term liabilities		i —		i 82
Interest rate swaps	Not designated	Other assets		i 7		i —
Interest rate swaps	Not designated	Other long-term liabilities		i 81		i 49

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

Cross-currency swaps

Interest expense

( i 5

)

( i 2

)

( i 12

)

( i 6

)

Interest rate swaps

Interest expense

i 11

i 18

i 35

i 52

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 2021 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 July 2, 2022 and October 2, 2021, along with the impairment loss recognized on the fair value measurement during the period:

As of July 2, 2022

Level 1

Level 2

Level 3

Total

Impairment

Indefinite-lived trademarks

i —

i 248

i —

Goodwill

i —

i 4,969

i —

Definite lived intangible assets

i —

i 1,725

i —

Property, plant, and equipment

i —

i 4,560

i —

Total

i —

i 11,502

i —

As of October 2, 2021

Level 1

Level 2

Level 3

Total

Impairment

Indefinite-lived trademarks

i —

i 248

i —

Goodwill

i —

i 5,192

i —

Definite lived intangible assets

i —

i 1,994

i —

Property, plant, and equipment

i —

i 4,677

i 1

Total

i —

i 12,111

i 1

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 $ i 456 million as of July 2, 2022. 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 higher effective tax rate was negatively impacted by state taxes and global intangible low-taxed income provisions, partially offset by other discrete items.

Index

10. Segment and Geographic Data

The Company’s operations are organized into i four reporting segments: Consumer Packaging International, Consumer Packaging North America, Health, Hygiene & Specialties, and Engineered Materials. The structure is designed to align us with our customers, provide optimal 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

Net sales:

Consumer Packaging International

i 1,096

i 1,095

i 3,290

i 3,143

Consumer Packaging North America

i 927

i 847

i 2,659

i 2,264

Health, Hygiene & Specialties

i 788

i 828

i 2,429

i 2,349

Engineered Materials

i 915

i 905

i 2,696

i 2,425

Total net sales

i 3,726

i 3,675

i 11,074

i 10,181

Operating income:

Consumer Packaging International

i 82

i 79

i 248

i 214

Consumer Packaging North America

i 104

i 76

i 235

i 212

Health, Hygiene & Specialties

i 56

i 113

i 186

i 323

Engineered Materials

i 94

i 75

i 237

i 231

Total operating income

i 336

i 343

i 906

i 980

Depreciation and amortization:

Consumer Packaging International

i 78

i 88

i 242

i 258

Consumer Packaging North America

i 53

i 160

i 164

Health, Hygiene & Specialties

i 44

i 43

i 133

i 130

Engineered Materials

i 28

i 85

i 87

Total depreciation and amortization

i 203

i 212

i 620

i 639

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

Quarterly Period Ended

Three Quarterly Periods Ended

Net sales:

United States and Canada

i 2,030

i 1,937

i 5,978

i 5,342

Europe

i 1,320

i 1,308

i 3,937

i 3,658

Rest of world

i 376

i 430

i 1,160

i 1,181

Total net sales

i 3,726

i 3,675

i 11,074

i 10,181

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 statements.

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

12. Share Repurchase Program

During the quarterly period ended July 2, 2022, the Company repurchased and retired i 5,114 thousand shares for $ i 286 million. For the three quarterly periods ended July 2, 2022, the Company repurchased and retired i 10,870 thousand shares for $ i 637 million. Authorized share repurchases of $ i 414 million remain available to the Company.

13. 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.

Index

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)

Numerator

Consolidated net income

i 207

i 194

i 533

i 505

Denominator

Weighted average common shares outstanding - basic

i 128.6

i 135.1

i 132.6

i 134.3

Dilutive shares

i 2.1

i 3.4

i 3.0

i 3.4

Weighted average common and common equivalent shares outstanding - diluted

i 130.7

i 138.5

i 135.6

i 137.7

Per common share earnings

Basic

i 1.61

i 1.44

i 4.02

i 3.76

Diluted

i 1.58

i 1.40

i 3.93

i 3.67

i i 1.2 / million shares were excluded from the diluted EPS calculation for the quarterly and three quarterly periods ended July 2, 2022 as their effect would be anti-dilutive. i i No / shares were excluded for the quarterly and three quarterly periods ended July 3, 2021.

14. Accumulated Other Comprehensive Loss

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

Quarterly Period Ended

Currency

Translation

Defined Benefit

Pension and Retiree

Health Benefit Plans

Derivative

Instruments

Accumulated Other

Comprehensive Loss

Balance at April 2, 2022

( i 139

)

( i 67

)

i 25

( i 181

)

Other comprehensive income (loss) before reclassifications

( i 159

)

i —

i 18

( i 141

)

Net amount reclassified

i —

i 1

Balance at July 2, 2022

( i 298

)

( i 67

)

i 44

( i 321

)

Currency

Translation

Defined Benefit

Pension and Retiree

Health Benefit Plans

Derivative

Instruments

Accumulated Other

Comprehensive Loss

Balance at April 3, 2021

( i 173

)

( i 116

)

( i 86

)

( i 375

)

Other comprehensive income (loss) before reclassifications

i 91

i —

( i 5

)

i 86

Net amount reclassified

i —

i 3

Balance at July 3, 2021

( i 82

)

( i 116

)

( i 88

)

( i 286

)

Three Quarterly Periods Ended

Currency

Translation

Defined Benefit

Pension and Retiree

Health Benefit Plans

Derivative

Instruments

Accumulated Other

Comprehensive Loss

Balance at October 2, 2021

( i 154

)

( i 67

)

( i 75

)

( i 296

)

Other comprehensive income (loss) before reclassifications

( i 144

)

i —

i 113

( i 31

)

Net amount reclassified

i —

i 6

Balance at July 2, 2022

( i 298

)

( i 67

)

i 44

( i 321

)

Currency

Translation

Defined Benefit

Pension and Retiree

Health Benefit Plans

Derivative

Instruments

Accumulated Other

Comprehensive Loss

Balance at September 26, 2020

( i 278

)

( i 116

)

( i 157

)

( i 551

)

Other comprehensive income before reclassifications

i 196

i —

i 62

i 258

Net amount reclassified

i —

i 7

Balance at July 3, 2021

( i 82

)

( i 116

)

( i 88

)

( i 286

)

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 Engineered Materials. 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 containers, closures and dispensing systems, pharmaceutical devices and packaging, bottles and canisters, and technical components. The Consumer Packaging North America segment primarily consists of containers and pails, foodservice, closures, overcaps, bottles, prescription vials, and tubes. The Health, Hygiene & Specialties segment primarily consists of nonwoven specialty materials, tapes and adhesives, and films used in hygiene, infection prevention, personal care, industrial, construction, and filtration applications. The Engineered Materials segment primarily consists of 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 butyl rubber, adhesives, paper and packaging materials, linerboard, rayon, polyester fiber, and foil, 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. Supply shortages can lead to increased raw material price volatility, which we have experienced in recent quarters. Raw material price changes are generally passed on to customers through contractual price mechanisms over time and other means. We expect supply chain challenges to continue throughout fiscal 2022 and will continue to work closely with our suppliers and customers in an effort to minimize any impact.

Outlook. The Company is affected by general economic and industrial growth, raw material availability, cost inflation, supply chain disruptions, and general industrial production. The COVID-19 pandemic has resulted in both advantaged and disadvantaged products within all segments. During fiscal 2022, we have experienced a headwind as the advantaged products, particularly in our Health, Hygiene & Specialties segment, related to the COVID-19 pandemic moderated while recovery of disadvantaged products lags with the ultimate impact being affected by both the duration certain products remain advantaged and timing of when disadvantaged products normalize. Our business has both geographic and end market diversity, which reduces the effect of any one of these factors on our overall performance. Our results are affected by our ability to pass through raw material and other cost changes to our customers, improve manufacturing productivity and adapt to volume changes of our customers. We believe that by providing advantaged products in targeted markets, our underlying long-term demand fundamental in all divisions will remain strong as we focus on delivering protective solutions that enhance consumer safety and execute on the Company’s mission statement of “Always Advancing to Protect What’s Important.” For fiscal 2022, we project cash flow from operations of $1.5 billion, which assumes the benefit from the lag in recovery of inflation, an investment in working capital from inflation and additional inventory due to supply chain disruptions, and free cash flow of $750 million. Projected fiscal 2022 free cash flow assumes $750 million of capital spending. In addition, we repurchased approximately 11 million shares for $637 million in fiscal 2022 YTD and expect to purchase at least $700 million of shares in fiscal 2022. 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.”

Index

Results of Operations

Comparison of the Quarterly Period Ended July 2, 2022 (the “Quarter”) and the Quarterly Period Ended July 3, 2021 (the “Prior Quarter”)

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

Consolidated Overview
	Quarter		Prior Quarter		$ Change			% Change
Net sales	$	3,726	$	3,675	$	51			1	%
Cost of goods sold		3,105		3,049		56			2	%
Other operating expenses		285		283		2			1	%
Operating income	$	336	$	343	$	(7	)		(2	)%

Net Sales: The net sales growth is primarily attributed to increased selling prices of $301 million due to the pass through of inflation. This increase was partially offset by an organic volume decline of 2%, a $151 million unfavorable impact from foreign currency changes, and Prior Quarter divestiture sales of $16 million. The volume decline is primarily attributed to general market softness in industrial markets and the moderation of advantaged products related to the COVID-19 pandemic.

Cost of goods sold: The cost of goods sold increase is attributed to inflation, partially offset by the volume decline, a decrease from foreign currency changes, and Prior Quarter divestiture cost of goods sold of $12 million.

Operating Income: The operating income decrease is primarily attributed to a $22 million unfavorable impact from foreign currency, and an $11 million unfavorable impact from the volume decline, partially offset by a $28 million favorable impact from price cost spread and product mix.

Consumer Packaging International
	Quarter		Prior Quarter		$ Change		% Change
Net sales	$	1,096	$	1,095	$	1		—
Operating income	$	82	$	79	$	3		4	%

Net Sales: The net sales growth in the Consumer Packaging International segment is primarily attributed to increased selling prices of $138 million due to the pass through of inflation, partially offset by a $99 million unfavorable impact from foreign currency changes, an organic volume decline of 2%, and Prior Quarter divestiture sales of $16 million. The volume decline is primarily attributed to market softness in industrial markets.

Operating Income: The operating income increase is primarily attributed to a $15 million favorable impact from price cost spread and product mix, and a decrease in depreciation and amortization expense, partially offset by a $15 million unfavorable impact from foreign currency.

Consumer Packaging North America
	Quarter		Prior Quarter		$ Change		% Change
Net sales	$	927	$	847	$	80		9	%
Operating income	$	104	$	76	$	28		37	%

Net Sales: The net sales growth in the Consumer Packaging North America segment is primarily attributed to increased selling prices of $80 million due to the pass through of inflation.

Operating Income: The operating income increase is primarily attributed to a $30 million favorable impact from price cost spread.

Index

Health, Hygiene & Specialties
	Quarter		Prior Quarter		$ Change			% Change
Net sales	$	788	$	828	$	(40	)		(5	)%
Operating income	$	56	$	113	$	(57	)		(50	)%

Net Sales: The net sales decline in the Health, Hygiene & Specialties segment is primarily attributed to a 3% volume decline and a $17 million unfavorable impact from foreign currency changes. The volume decline is primarily attributed to the moderation of advantaged products related to the COVID-19 pandemic.

Operating Income: The operating income decrease is primarily attributed to a $49 million unfavorable impact from negative product mix, lag in recovering inflation, and an unfavorable impact from foreign currency changes.

Engineered Materials
	Quarter		Prior Quarter		$ Change		% Change
Net sales	$	915	$	905	$	10		1	%
Operating income	$	94	$	75	$	19		25	%

Net Sales: The net sales growth in the Engineered Materials segment is primarily attributed to increased selling prices of $81 million due to the pass through of inflation, partially offset by a volume decline of 4% and a $35 million unfavorable impact from foreign currency changes. The volume decline is primarily attributed to pivoting the sales mix to higher value categories and general market softness.

Operating Income: The operating income increase is primarily attributed to a $29 million favorable impact from price cost spread, partially offset by an unfavorable impact from foreign currency changes and the volume decline.

Other expense, net
	Quarter		Prior Quarter		$ Change			% Change
Other expense, net	$	7	$	14	$	(7	)		(50	)%

The other expense decrease is primarily attributed to debt extinguishment expense in the Prior Quarter, partially offset by unfavorable foreign currency changes related to the remeasurement of non-operating intercompany balances in the Quarter.

Interest expense, net
	Quarter		Prior Quarter		$ Change			% Change
Interest expense, net	$	70	$	76	$	(6	)		(8	)%

The interest expense decrease is primarily the result of refinancing activities and repayment of borrowings in fiscal 2021.

Changes in Comprehensive Income

The $216 million decline in comprehensive income from the Prior Quarter is primarily attributed to a $250 million unfavorable change in currency translation, partially offset by a $13 million improvement in net income, and a $21 million favorable change in the fair value of derivative instruments, net of tax. Currency translation gains and losses are primarily related to non-U.S. subsidiaries with a functional currency other than U.S. dollars whereby assets and liabilities are translated from the respective functional currency into U.S. dollars using period-end exchange rates. The change in currency translation in the QTD was primarily attributed to locations utilizing the euro, British pound sterling, Brazilian real, Canadian dollar, Chinese renminbi and Mexican peso as the functional currency. As part of the overall risk management, the Company uses derivative instruments to (i) reduce our exposure to changes in interest rates attributed to the Company’s borrowings and (ii) reduce foreign currency exposure to translation of certain foreign operations. The Company records changes to the fair value of these instruments in Accumulated other comprehensive loss. The change in fair value of these instruments in fiscal 2022 versus fiscal 2021 is primarily attributed to the change in the forward interest and foreign exchange curves between measurement dates.

Index

Comparison of the Three Quarterly Periods Ended July 2, 2022 (the “YTD”) and the Three Quarterly Periods Ended July 3, 2021 (the “Prior YTD”)

The Company’s U.S. based results for the YTD and Prior YTD are based on a twenty-six and twenty-seven week period, respectively. Business integration expenses consist of restructuring and impairment charges, divestiture related costs, and other business optimization costs. Tables present dollars in millions.

Consolidated Overview
	YTD		Prior YTD		$ Change			% Change
Net sales	$	11,074	$	10,181	$	893			9	%
Cost of goods sold		9,297		8,273		1,024			12	%
Other operating expenses		871		928		(57	)		(6	)%
Operating income	$	906	$	980	$	(74	)		(8	)%

Net Sales: The net sales growth is primarily attributed to increased selling prices of $1.6 billion due to the pass through of inflation. This increase was partially offset by an organic volume decline of 2%, a $232 million unfavorable impact from foreign currency changes, extra shipping days in the Prior YTD of $131 million, and Prior YTD divestiture sales of $78 million. The volume decline is primarily attributed to supply chain disruptions, general market softness and the moderation of advantaged products related to the COVID-19 pandemic.

Cost of goods sold: The cost of goods sold increase is attributed to inflation, partially offset by the volume decline, a decrease from foreign currency changes, extra shipping days in the Prior YTD, and Prior YTD divestiture cost of goods sold of $62 million.

Other operating expenses: The other operating expenses decrease is primarily attributed to a decrease in business integration expense, amortization expense, and selling, general, and administrative expense.

Operating Income: The operating income decrease is primarily attributed to a $37 million unfavorable impact from foreign currency, a $36 million unfavorable impact from the volume decline, a $12 million unfavorable impact from price cost spread, a $22 million decrease from extra shipping days in the Prior YTD, and a negative impact from Prior YTD divestiture operating income, partially offset by a $29 million decrease in business integration expense, and a decrease in depreciation and amortization expense.

Consumer Packaging International
	YTD		Prior YTD		$ Change		% Change
Net sales	$	3,290	$	3,143	$	147		5	%
Operating income	$	248	$	214	$	34		16	%

Net Sales: The net sales growth in the Consumer Packaging International segment is primarily attributed to increased selling prices of $398 million due to the pass through of inflation, partially offset by a $166 million unfavorable impact from foreign currency changes, and Prior YTD divestiture sales of $44 million.

Operating Income: The operating income increase is primarily attributed to a $34 million decrease in business integration expense, a $20 million favorable impact from price cost spread, and a decrease in depreciation and amortization expense, partially offset by a $26 million unfavorable impact from foreign currency.

Consumer Packaging North America
	YTD		Prior YTD		$ Change		% Change
Net sales	$	2,659	$	2,264	$	395		17	%
Operating income	$	235	$	212	$	23		11	%

Net Sales: The net sales growth in the Consumer Packaging North America segment is primarily attributed to increased selling prices of $451 million due to the pass through of inflation, partially offset by a $40 million decrease from extra shipping days in the Prior YTD.

Operating Income: The operating income increase is primarily attributed to a $34 million favorable impact from price cost spread, partially offset by a $7 million decrease from extra shipping days in the Prior YTD.

Index

Health, Hygiene & Specialties
	YTD		Prior YTD		$ Change			% Change
Net sales	$	2,429	$	2,349	$	80			3	%
Operating income	$	186	$	323	$	(137	)		(42	)%

Net Sales: The net sales growth in the Health, Hygiene & Specialties segment is primarily attributed to increased selling prices of $227 million due to the pass through of inflation, partially offset by a 3% volume decline, a $42 million decrease from extra shipping days in the Prior YTD, and a $25 million unfavorable impact from foreign currency changes. The volume decline is primarily attributed to the moderation of advantaged products related to the COVID-19 pandemic.

Operating Income: The operating income decrease is primarily attributed to a $121 million unfavorable impact from price cost spread and negative product mix, and a decrease from extra shipping days in the Prior YTD.

Engineered Materials
	YTD		Prior YTD		$ Change		% Change
Net sales	$	2,696	$	2,425	$	271		11	%
Operating income	$	237	$	231	$	6		3	%

Net Sales: The net sales growth in the Engineered Materials segment is primarily attributed to increased selling prices of $507 million due to the pass through of inflation, partially offset by a volume decline of 5%, a $44 million decrease from extra shipping days in the Prior YTD, a $41 million unfavorable impact from foreign currency changes, and Prior YTD divestiture sales of $34 million. The volume decline is primarily attributed to supply chain disruptions.

Operating Income: The operating income increase is primarily attributed to a $42 million favorable impact from price cost spread, partially offset by a $14 million unfavorable impact from the volume decline, a $13 million impact from Prior YTD divestiture operating income, and a decrease from extra shipping days in the Prior YTD.

Other expense
	YTD		Prior YTD		$ Change			% Change
Other expense	$	13	$	45	$	(32	)		(71	)%

The other expense decrease is primarily attributed to foreign currency changes related to the remeasurement of non-operating intercompany balances and debt extinguishment expense in the Prior YTD.

Interest expense
	YTD		Prior YTD		$ Change			% Change
Interest expense	$	212	$	257	$	(45	)		(18	)%

The interest expense decrease is primarily the result of refinancing activities and repayments of borrowings in fiscal 2021.

Changes in Comprehensive Income

The $262 million decline in comprehensive income from the Prior YTD was primarily attributed to a $340 million unfavorable change in currency translation, partially offset by a $28 million improvement in net income, and a $50 million favorable change in the fair value of derivative instruments, net of tax. Currency translation gains and losses are primarily related to non-U.S. subsidiaries with a functional currency other than U.S. dollars whereby assets and liabilities are translated from the respective functional currency into U.S. dollars using period-end exchange rates. The change in currency translation in the YTD was primarily attributed to locations utilizing the euro, British pound sterling, Brazilian real, Canadian dollar, Chinese renminbi and Mexican peso as the functional currency. As part of the overall risk management, the Company uses derivative instruments to (i) reduce our exposure to changes in interest rates attributed to the Company’s borrowings and (ii) reduce foreign currency exposure to translation of certain foreign operations. The Company records changes to the fair value of these instruments in Accumulated other comprehensive loss. The change in fair value of these instruments in fiscal 2022 versus fiscal 2021 is primarily attributed to the change in the forward interest and foreign exchange curves between measurement dates.

Index

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 an outstanding balance of $170 million on its $1,050 million asset-based revolving line of credit that matures in May 2024. The Company was in compliance with all covenants at the end of the Quarter.

Cash Flows

Net cash from operating activities decreased $567 million from the Prior YTD primarily attributed to working capital inflation and timing of payables in the YTD.

Net cash used in investing activities increased $70 million from the Prior YTD primarily attributed to fewer proceeds from business divestitures and increased property, plant and equipment spending.

Net cash used in financing activities decreased $75 million from the Prior YTD primarily attributed to higher net borrowings, partially offset by repurchases of common stock in the YTD.

Share Repurchases

During fiscal 2022, the Company repurchased approximately 11 million shares for $637 million. Authorized share repurchases of $414 million remain available to the Company.

Free Cash Flow

Our consolidated free cash flow for the YTD and Fiscal 2022 Outlook are summarized as follows:

	July 2, 2022			Fiscal 2022 Outlook
Cash flow from operating activities	$	345		$	1,500
Additions to property, plant and equipment, net		(556	)		(750	)
Free cash flow	$	(211	)	$	750

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 July 2, 2022, our cash balance was $527 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.

Index

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.

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
	July 2, 2022
Net sales	$	5,772
Gross profit		956
Earnings from continuing operations		319
Net income	$	319

Includes $2 million of income associated with intercompany activity with non-guarantor subsidiaries.

	July 2, 2022		October 2, 2021
Assets
Current assets	$	2,008	$	2,293
Noncurrent assets		6,040		5,979

Liabilities
Current liabilities	$	1,225	$	1,533
Intercompany payable		634		629
Noncurrent liabilities		10,812		11,083

Index

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

We are exposed to market risk from changes in interest rates primarily through our senior secured credit facilities. Our senior secured credit facilities are comprised of (i) $3.4 billion term loans and (ii) a $1,050 million revolving credit facility with $170 million outstanding. Borrowings under our senior secured credit facilities bear interest at a rate equal to an applicable margin plus LIBOR or SOFR. The applicable margin for borrowings under the revolving credit facility ranges from 1.25% to 1.50%, and the margin for term loans is 1.75% per annum. As of period end, the LIBOR rate of approximately 1.80% was applicable to the term loans. A 0.25% change in LIBOR would increase our annual interest expense by $3 million on variable rate term loans.

We seek to minimize interest rate volatility risk through regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. These financial instruments are not used for trading or other speculative purposes. (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 $15 million unfavorable impact on our Net income for the three quarterly periods ended July 2, 2022. (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.

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.

Index

Part II. Other Information

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

On February 24, 2022, Russia launched an invasion of Ukraine which has resulted in increased volatility in various sectors and markets. The extent and duration of the military action, resulting sanctions and future market disruptions in the region are not currently known. While the Company’s sales and assets in Russia are immaterial, the effects of the hostilities and sanctions may spill over to our customers and negatively impact their operations. Additionally, the ongoing military action along with the potential for a wider conflict could further increase market volatility and cause negative effects on regional and global economic markets, industries, and companies.

Before investing in our securities, we recommend that investors carefully consider the risks described in our most recent Form 10-K and other 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 other 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 July 2, 2022.

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		147,000	$	59.03		147,000	$	691
May		2,912,000		55.93		2,912,000		528
June		2,055,150		55.51		2,055,150		414
Total		5,114,150	$	55.85		5,114,150	$	414

(a)	All open market purchases during the quarter were made under the fiscal 2022 authorization from our board of directors to purchase up to $1 billion of shares of common stock. (See Note 12.)

Index

Item 6. Exhibits

Exhibit No.		Description of Exhibit
22.1*		Subsidiary Guarantors
31.1*		Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer.
31.2*		Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer.
32.1**		Section 1350 Certification of the Chief Executive Officer.
32.2**		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

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 4, 2022	By:	/s/ *Mark W. Miles*
		Mark W. Miles
		Chief Financial Officer

Dates Referenced Herein and Documents Incorporated by Reference

This ‘10-Q’ Filing	Date	Other Filings

Filed on:	8/4/22
For Period end:	7/2/22
	4/2/22	10-Q
	2/24/22
	10/2/21	10-K
	7/3/21	10-Q
	4/3/21	10-Q
	9/26/20	10-K, 8-K
		List all Filings

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Filing Submission 0001140361-22-028207 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Berry Global Group, Inc. – ‘10-Q’ for 7/2/22

On: Thursday, 8/4/22, at 4:23pm ET · For: 7/2/22 · Accession #: 1140361-22-28207 · File #: 1-35672

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Quarterly Report — Form 10-QFiling Table of Contents

‘10-Q’ — Berry Global Group 10QDocument Table of Contents

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Dates Referenced Herein and Documents Incorporated by Reference

Quarterly Report — Form 10-Q

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‘10-Q’ — Berry Global Group 10Q

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