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Berry Global net income increases in Q2 fiscal 2017

Berry Global Group has reported results for its second fiscal 2017 quarter, referred to in the following as the March 2017 quarter.

Net income for the March 2017 quarter was $72 million ($0.54 per diluted share) compared to $59 million ($0.47 per diluted share) in the prior year quarter. Adjusted net income in the March 2017quarter was 36 percent higher at $0.79 per diluted share compared to $0.58 per diluted share in the prior year quarter.

Net sales increased 12% over the prior year quarter and was a quarterly record at $1 billion 806 million. Operating income for the quarter increased to $175 million compared to $165 million in the prior year quarter. Operating EBITDA was also a quarterly record at $336 million (18.6% of net sales).

Cash flow from operations for the last four quarters ended March 2017 was $829 million, and adjusted free cash flow for the same period was $524 million.

We are reaffirming our fiscal 2017 guidance of projected cash flow from operations of $925 million and adjusted free cash flow of $550 million.

Increased our annual cost synergies for the AEP acquisition from our original guidance of $50 million to $70 million.

March 2017 Quarter Results

The net sales increase of $192 million from the prior year quarter is primarily attributed to acquisition net sales of $205 million related to the AEP Industries, Inc. (“AEP”) acquisition and selling price increases of $9 million, partially offset by a negative $15 million impact from a 1% volume decline and a $7 million negative impact from foreign currency changes.

The operating income increase of $10 million from the prior year quarter is primarily attributed to acquisition operating income of $19 million, a $10 million decrease in selling, general and administrative expense, and a$6 million decrease in depreciation and amortization. These improvements were partially offset by a $9 million decline in our product mix and price/cost spread, a $10 million increase in business integration expenses, a negative $4 million impact from base volume declines, and an unfavorable impact from foreign currency changes.

Engineered Materials’ net sales increased by $217 million from prior year quarter primarily attributed to acquisition net sales of $205 million and selling price increases of $18 million, partially offset by slightly lower base volumes.

The operating income increase of $19 million from prior year quarter is primarily attributed to acquisition operating income of $19 million, a $10 million improvement in our product mix and price/cost spread, and a$4 million reduction in selling, general and administrative expenses, partially offset by a $13 million increase in business integration expense. The business integration expenses primarily consisted of a $5 million AEP purchase accounting inventory step-up and deal costs associated with the AEP transaction.

Health, Hygiene, and Specialties’ net sales decreased by $4 million from prior year quarter primarily attributed to selling price decreases of $9 million and a $6 million unfavorable impact from currency translation, partially offset by a positive $10 million impact from a 2% base volume improvement.

The operating income decrease of $6 million from prior year quarter is primarily attributed to a $16 milliondecrease in price/cost spread and an unfavorable impact from foreign currency changes, partially offset by a$4 million improvement in productivity in manufacturing, a $4 million decrease in depreciation expense, and a $2 million impact from the base volume improvement.

Consumer Packaging’s net sales decreased by $21 million from prior year quarter primarily attributed to a negative $20 million impact from a 3% base volume decline.The volume decline was primarily attributed to soft consumer demand in portions of our Rigid Open Top product line.

The operating income decrease of $3 million from prior year quarter was primarily attributed to a $5 millionimpact from base volume declines, a $3 million decrease in price/cost spread, and a negative impact from productivity in manufacturing, partially offset by a $4 million decrease in selling, general and administrative expense and a decrease in business integration expenses.