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Berry Plastics Group, Inc. Reports Fourth Quarter And Fiscal Year 2013 Results

Berry Plastics Group, Inc. (NYSE:BERY) today reported results for its fiscal fourth quarter 2013, referred to in the following as the September 2013 quarter, and fiscal year 2013:
  • September 2013 quarter Operating EBITDA of $194 million and fiscal 2013 Adjusted EBITDA of $790 million
  • September 2013 quarter net income of $26 million ($0.22 per diluted share) and fiscal 2013 net income of $57 million ($0.48 per diluted share)
  • Net debt reduction of $580 million and leverage ratio (net debt/Adjusted EBITDA) reduction to 4.8x, a total reduction of 0.7x during fiscal 2013
  • Fiscal 2013 Adjusted free cash flow of $243 million, representing a 10 percent adjusted free cash flow yield
  • Fiscal 2013 cash flow from operating activities of $464 million
  • Adjusted net income per share of $0.33 for the September 2013 quarter compared to $0.34 in the September 2012 quarter

“The September quarter continued to be pressured by weak consumer demand, similar to trends seen throughout 2013 and the back half of 2012,” said Jon Rich, Chairman and CEO of Berry Plastics. “To offset the impact of continuing tough economic challenges, Berry has taken many necessary, proactive steps to remain competitive and a leader in the plastics packaging industry.”

September Quarter and Fiscal Year 2013 ResultsFor the quarter ended September 2013, the Company’s net sales were flat versus the September 2012 quarter at $1,204 million. The quarter consisted of increased selling prices due to higher material costs offset by lower volumes due to softer customer demand.
        Quarterly Period Ended (Unaudited)
Net sales (in millions) September 28, 2013     September 29, 2012    

$ Change
    % Change
Rigid Open Top $ 299     $ 318     $ (19 )     (6 %)
Rigid Closed Top   351       352       (1 )     (- %)
Rigid Packaging 650 670 (20 ) (3 %)
Engineered Materials 367 352 15 4 %
Flexible Packaging   187       182       5       3 %
Total net sales $ 1,204     $ 1,204     $        

For fiscal year 2013, the Company’s net sales declined by 2 percent to $4,647 million from $4,766 million as compared to the same period for 2012. This decline was primarily attributed to lower selling prices of 1 percent and sales volume declines of 2 percent related to softer customer demand, year-over-year adverse change in weather and reduction in raw material content partially offset by acquisition volumes and volume gains in certain of our product lines.
        Fiscal Year Ended (Unaudited)
Net sales (in millions) September 28, 2013     September 29, 2012    

$ Change

% Change
Rigid Open Top $ 1,127     $ 1,229     $ (102 )     (8 %)
Rigid Closed Top   1,387       1,438       (51 )     (4 %)
Rigid Packaging 2,514 2,667 (153 ) (6 %)
Engineered Materials 1,397 1,362 35 3 %
Flexible Packaging   736       737       (1 )     (- %)
Total net sales $ 4,647     $ 4,766     $ (119 )     (2 %)

Capital Structure and Adjusted Free Cash FlowThe ratio of net debt of $3,804 million to Adjusted EBITDA for the fiscal year ended September 28, 2013 of $790 million was 4.8x. The ratio at the end of September 29, 2012 quarter was 5.5x. The Company’s Adjusted free cash flow for fiscal 2013 was $243 million. Adjusted free cash flow for the September 2013 quarter was $120 million.

September 28, 2013

September 29, 2012
(in millions) (Unaudited)
Term Loan $ 1,125 $ 1,134
Incremental Term Loan 1,397
Revolving line of credit 73

9½% Second Priority Notes
500 500
Senior Unsecured Term Loan 18 39
9¾% Second Priority Notes 800 800
Retired debt 1,834
Debt discount, net (8 )
Capital leases and other 114 91
Cash and cash equivalents   (142 )   (87 )
Net debt $ 3,804   $ 4,384  

Outlook“Our enhanced focus on driving organic growth and international growth coupled with our progress on operational efficiencies and cost reduction actions, pave the way for success for Berry in the future. As we move forward, Berry will remain focused on our key strategic initiatives to continue to drive shareholder value,” said Rich.

In November, the Company initiated a cost reduction plan designed to deliver meaningful cost savings and optimal equipment utilization. This plan will result in several plant rationalizations. The costs associated with this plan will primarily consist of one-time costs associated with facility consolidation, including severance and termination benefits for employees of approximately $6 million, other costs associated with exiting facilities of approximately $30 million and non-cash asset impairment charges of approximately $11 million. In addition, as part of this cost reduction plan the Company estimates it will incur capital expenditures of approximately $13 million. Overall these facility restructuring programs are projected to generate approximately $27 million of annual operating savings when fully implemented. These amounts are preliminary estimates based on the information currently available to management. The plan is expected to be fully implemented by the end of fiscal 2014.

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